European Central Bank to devaluate the Euro

European Central Bank president Mario Draghi stated that exchange rates are not part of their policy but the 9% currency slide is inevitable.   This depreciation in a way will increase the cost of imports and competitiveness among exporters will be hiked up.   Depreciating the euro will be more favourable towards inflation as expectations for data is particularly low. Inflation figures will be published tomorrow.   Earlier, the euro fell for the month of May in the array of multiple stimulus measures adopted but slowly consolidated after Draghi cut rates and approved to enlarge the ECB’s budget by 1 trillion euros.   Decidedly, President Draghi will be discussing the plan of asset buying during this week in Naples throughout the Governing Council meeting.   He also pointed to the fact that due to the differences between the Federal Reserve and ECB’s policy, devaluation was to be foreseen.   The Naples Meeting is supposed to switch to a smoother pace as inflation rates will not be re-considered, at least for some time as reported by the Bloomberg News Survey.   Previously, weak bank loans threatened the ECB’s attempt to stabilise the Eurozone and a switch to large-scale bond buying was firmly contested by Germany. Source: Bloomberg
Priscilla Camryn By: Priscilla Camryn