EUR/USD Analysis: ECB Monthly Bulletin Reveals Positive & Negative Indicators

NEW YORK (Forex News Now) – The European Central Bank released its Monthly Bulletin for the month of November, giving traders plenty of fodder for EUR/USD analysis ahead of the results of the G20 summit.

In the bulletin, the ECB called its current interest rates as “accommodative”, and maintained a positive outlook for the near term – while also commenting that uncertainty was prevailing.

The ECB states that current monetary policy is “appropriate” and flexibility will be key to responding to the economy in the near term as situations arise.  Inflation is expected to remain moderate, reaching 1.5% in 2010 and 2011 and rising slightly to 1.6% in 2012.  The 2010 numbers were revised upward by 0.1% from an original estimate, while the 2012 figures were revised downward by 0.1%.

The goal of the ECB is to keep inflation rates as close to 2% as possible without going under.  According to Eurostat, the euro zone’s annual HICP – Harmonised Index of Consumer Prices – came in at 1.9% in October, up from 1.8% in September.  These figures reveal what the ECB expects – steadily increasing inflation through the end of the year and all of 2011.

Growth prospects for the euro zone were also included in the bulletin. The ECB’s forecasters predict that the area will experience an economic growth rate of 1.6% for 2010, revised upward by 0.5% from a previous estimate. Next year’s growth rate is lower at 1.5%, with 2012’s growth rate estimated to ring in at 1.7%.

Unemployment is expected to continue at its current level of 10.1% through 2010, and drop only slightly to 10% in 2011. The ECB expects the rate to drop further by the end of 2011, to 9.6%.

In all, the bulletin had a few positives and negatives for EUR/USD analysis. The positive outlook espoused by the ECB is favorable for euro traders, especially with recent doubts about debt problems in the euro zone periphery re-emerging.  Rising inflation that is still below the 2% threshold is also positive news that could lend strength to a rise in the euro.

Of course, the steadily-high unemployment rate and still-low growth are negative for EUR/USD analysis, especially since the bank expects growth to actually dip through 2011.  Still, the main driving factor in the pair’s relationship is the relative performance of the euro zone economy to the American economy, which is still in flux, with an outlook for 2011 that is all but certain.

The euro fell 0.81% against the dollar, to 1.367 – its lowest point since early October.