-Stan Shamu, IG marketing strategist
Inflation and unemployment reports were the last pieces of puzzle ahead of the ECB meeting this Thursday. They both can play a decisive role for Mario Draghi, who will announce a stimulus package that will include various measures to boost growth and inflation. Nevertheless, fundamentals failed to deliver, as inflation fell further and unemployment still remained around historically high levels. A report from Eurostat unveiled the cost of living in the 18-nation'b bloc economy rose just 0.5% in May, following a 0.7% pickup a month earlier, missing expectations and moving further away from the official target of 2%. The core measure, which excludes most volatile prices, also weakened to 0.7% from the 1% reading in April and fell short of market's estimations as well. At the same time, the agency reported a slight drop in the unemployment rate. The headline measure of unemployment stood at 11.7% in April compared with 11.8% a month earlier. There are now 18,751 million people without a job in the Euro area. This is by 151,000 less than a month ago, while a drop in youth unemployment is pointing at stabilization of the labour market.
The ECB is now projected to cut all three rates and announce measures to spur lending to small and medium sized companies. While latest fundamentals can provoke a massive sell-off of the shared currency, a support level at 1.3587 seems to be unbreakable, at least, unless we hear Mario Draghi's words.
© Dukascopy Bank SA