‘Forward guidance'- more and more central bankers stick to this approach now, after Mark Carney implemented it last year during his first policy meeting as the Governor of the Bank of England. The BoE, the Fed and the Bank of Canada, and now Mario Draghi claims that his forward guidance will help to weaken the single currency and decrease real interest rates, diminishing risks of deflation.
According to Draghi, the implementation of the forward guidance itself is loosening the monetary policy, as real interest rates move to the south. These comments are crucial, and further explanation will be also welcome by markets, as overstrong shared currency has kept consumer prices subdued since 2012. Moreover, Draghi pointed out that the exchange rate is not a policy target for the European Central Bank, the President warned that constantly rising exchange rate is adding more pressure on the policymakers to maintain price stability. The EUR/USD currency pair advanced more than 6.5% during the last year, while the common currency itself gained around 6.9% versus the basket of developed-market peers.
Following Draghi's remarks, the most traded currency pair lost 0.3% and continued its depreciation on Friday. The pair is still trading at 1.3874; however, according to almost 70% of Dukascopy traders, the pair will continue moving to the south.
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