24.10.201816:15 Forex Analysis & Reviews: ECB meeting: the fate of the euro in the hands of Draghi?

The currency traders will carefully study Mario Draghi's comments on Rome and inflation in the region at an ECB meeting on Thursday. The topic of Italy, the euro perceives very painful. Draghi can relieve his condition if he presents a constructive assessment of inflation in the eurozone. The hawkish signals should support the euro. Thus, the strap for surprise, which is able to move the market, is high.

Recall that in September, the head of the ECB helped the euro to soar to a 3-month peak after it called inflation pressure "relatively strong". However, since then, the single currency has lost growth due to the drama played out with the Italian budget.

The European regulator spelled out his plan for avoiding ultra-soft monetary policy in detail. Now, market participants are focused on how the Central Bank can reinvest revenues from bonds redeemed by issuers.

Completion of the purchase of new assets is expected by the end of the year, but officials may lengthen the period during which the Central Bank must reinvest its debt redemption income. There may be adjustments in the list of countries where the process of reinvestment of incomes is planned, or changes in the duration of securities in the portfolio. Italian bonds are likely to suffer the most, given that they were among the largest beneficiaries.

"We doubt that the Italian drama will undermine the ECB's plans to normalize the policy, as there are not enough signs that it hurts the rest of the eurozone," analysts at Credit Agricole SA, recommending long positions in the euro against the dollar, comment on the situation.

Nevertheless, the Italian theme should not be written off. Although Prime Minister Giuseppe Conte called the euro the currency of his children and grandchildren, it still means nothing. He also said that there was no reserve plan for the budget. In other words, Rome will continue to defend its opinion on the budget in the EU with a surplus of 2.4% of GDP.

The members of the European Commission did not accept this draft, pointing to a gross and insolent violation of the rules on government spending. The Italian government was asked to develop a new document within three weeks, otherwise, Brussels will have to apply sanctions.

Meanwhile, EUR / USD is not the first time coming to a critical level of 1.143 - 1.145. If there is a breakthrough in this area, the euro can stone to the bottom.

As for the dollar, its medium-term outlook looks moderately pessimistic. On the short-term horizon, it has practically no worthy competitors.

On Friday, the US Department of Commerce will release a release on GDP growth in the third quarter. According to experts, in July-September, the US economy expanded by 3.4% in terms of annual rates after an increase of 4.2% in the previous three months.