-Georg Fahrenschon, president of the German Savings Banks Association DSGV
The most traded currency pair showed little progress till Thursday, fluctuating within the weekly range. Both technical indicators and market sentiment are pointing to a downside movement, while on a 4H chart indicators are neutral, hence, a sideways movement can continue. It seems that markets are waiting for the ECB's meeting next week, where policymakers can enter into largely uncharted waters.
Speculations the ECB will pull the trigger next week have heated up after inflation rate moved back into dangerous zone at 0.7%. The upcoming meeting can potentially become a serious threat to the region's financial system and currency markets. However, this scenario can work only in case the ECB will go ahead with the increasingly popular idea of implementation of the negative deposit rate on bank deposits, hence, forcing domestic banks to pay for the privilege to park their money at the central bank. This week ECB's officials have already signalled it is a top choice, while the IMF claimed the SNB should consider the similar measure. Denmark's policy makers have already used negative deposit rate and considered it as a success, even though banks have had to absorb the added cost. The ECB will aim at boosting growth by first encouraging private banks to loan more money, and secondly, to lower the value of the single currency.
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