As expected, ECB president Mario Draghi talked down the euro by emphasizing that asset purchases can be adjusted in terms of size and duration if needed. He signaled that European Central Bank officials might expand stimulus if economy weakens further and inflation does not return to the ECB’s goal of 2 percent. The central bank cut its outlook for inflation and growth for each year through 2017. Draghi indicated that inflation rates may drop below zero before accelerating in 2016 and 2017. Until then, “there aren’t special limits to the possibilities that the ECB has in gearing up monetary policy,” he said.
In other words, traders got what they were looking for: A dovish Draghi, who sends the euro on a downhill ride.
Today, the market’s attention is focused on the August Non-Farm Payrolls report. Market participants are looking for a confirmation whether the U.S. economy is strong enough for a September liftoff amid recent turmoil in global markets. The odds for a Federal Reserve rate-hike at the September meeting are currently at 30 percent.
A weaker U.S. job report, however, may disappoint dollar bulls and lead to a short squeeze in the euro and GBP.
Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings are scheduled for release at 12:30 GMT.
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