The ECB Economic Bulletin suggests that the Central Bank keeps seeing an ongoing expansion in the economy but with increased downside risks. This is despite signs of moderating momentum, while global economic activity next year is expected to decelerate, with the announcement indicating that geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent.
The Bulletin confirms that the key ECB interest rates will remain unchanged at least through the summer of 2019, while also noting that this could be “as long as necessary” to ensure that inflation remains close to, but below, 2% over the medium term. In addition, the Bulletin reaffirms that QE will end in December 2018.
Markets have reacted positively to these comments, as worries regarding growth appear to be mostly external to the Euro Area. Given that the rest of the world appears to have been caught in a trade war or in other types of uncertainty and tensions, the Euro Area, having resolved the Italian budget issue, and with a plan regarding the possibility of a cliff-edge Brexit deal, internal prospects appear to be better than ever before, at least in the last 10 years.
The Euro broke above the 200-period moving average earlier today, as the Bulletin was announced and the question now is whether it will be able to maintain its gains. The EURUSD pair has not managed to break through the 38.2% Fib. level, at 1.1397, although the major Support level currently stands at 1.1386, at the 200-period MA level.