According to the Bank of France governor Francois Villeroy de Galhau, even if conflict in the Middle East did push up oil costs, policymakers would have to first analyze if such a shock fueled underlying prices and inflation expectations.
Asked if uncertainty could delay the start of monetary easing, he said “no — unless there is a surprise, we must not wait too much.”
ECB officials are converging on their June 6 rate decision as the moment to start lowering borrowing costs. Villeroy has been a vocal supporter of such a move, while his more hawkish colleagues have expressed varying levels of conviction, with some saying it’s only a rising likelihood.
“From the point we have sufficient confidence in the fact that we will meet the 2% inflation target by next year, our duty is to minimize the cost in terms of activity and employment,” Villeroy said. “That is the sense of a first cut in June.”
Even as June becomes more certain, the ECB’s course thereafter is less so as rate-setters are divided on how much easing to commit to. Villeroy said there will be subsequent future cuts at a “pragmatic pace.”
These assessments and statements of ECB representatives today contrast sharply with the probable suspension of easing plans of their overseas colleagues. The Fed's pause creates conditions for medium-term support of the US dollar and leads to weakening of EURUSD.
If in the next six months there will be no cardinal changes in the situation in the US and Eurozone, the level of 1.0400 is a likely target for EURUSD.
The final recommendation is to sell EURUSD.
The profit could be fixed at the level of 1.0400. The Stop-loss could be placed at the level of 1.0900.
It’s suggested to limit the trading volume to no more than 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
