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Ilian Yotov is the creator of The Quarters Theory, FX Strategist and internationally published author of "The Quarters Theory: The Revolutionary New Foreign Currencies Trading Method". Ilian is one of the leading Forex educators in the world and has trained thousands of Forex traders from countries around the globe. He is the founder of AllThingsForex.com and TraderTape.com and the host of the popular All Things Forex broadcast. His daily FX market analysis and columns are published on popular financial websites worldwide and he is a regular guest speaker at events for the Traders Expo, the International Securities Exchange (ISE), the Traders Expo, PFGBest, MBTrading, Traders Television and Trading Views Network. Currency traders continue to benefit from Ilian's extensive Forex trading experience, market knowledge and The Quarters Theory method as a meaningful, substantial way to improve their trading skills.

 

Jan. 9, 2019 (Western Union Business Solutions)  – The U.S. dollar’s rout today to October lows was justified by a cautious set of minutes from the last Fed meeting. The minutes from the Fed’s December meeting at which officials raised rates for the fourth time in 2018 played up higher uncertainty and risks facing the U.S. economy from trade wars and slowing global growth. The minutes’ cautious tone bolstered the view that U.S. interest rates are on hold for now and even hinted that policymakers may almost be done raising rates. With inflation well contained and at risk of moderating in the wake of weaker oil prices, it seems like the door is closed for now for the Fed to increase borrowing rates, a dovish outlook that could leave the dollar susceptible to further downside risk over the coming days and weeks.

The Fed issues its first policy decision of the year on Jan. 30 at which it is all but certain to leave rates unchanged at 2.5%.

GBP

 

When it comes to all things Brexit – prepare for the unexpected. The coming week looms large for sterling with Britain’s parliament slated to finally vote on the prime minister’s unpopular Brexit deal on Jan. 15. Failure to pass Theresa May’s EU-endorsed plan would risk a sterling selloff, a scenario that could heightened the risk of a disorderly, no-deal, hard split from the EU. Still, the endgame for Brexit is anything but certain and could range from a host of scenarios such as delaying Brexit day that’s set for March 29 or holding another Brexit referendum.

 

CAD

 

The Bank of Canada today should offer a key test of strength in the loonie’s recovery from May 2017 lows. The loonie has clawed back ground thanks to the moderating greenback and the rebound in stock markets and oil prices. Crude topped $50 today, buoying commodity currencies. The BOC is expected to leave its base rate unchanged at 1.75% in the wake of tumultuous moves in both stock and oil prices. The BOC will also issue new forecasts for growth. The bar appears to be elevated for Canada to raise rates at all this year so if policymakers sound a hawkish note it could add fuel to the recent decline in USDCAD.

 

EUR

 

The euro moved to within striking distance of recent peaks in the wake of mixed data from the euro zone. News that area unemployment fell by a notch to 7.9% in November, a decade-low, helped to dim the spotlight on growing signs of weakness in the bloc’s top economy. Germany reported a larger than expected trade surplus of €19.6 billion in November which resulted from Germans buying far less from abroad than they sold. Next to fundamentally impact the single currency will be Thursday minutes of the ECB’s final meeting of 2018.

 

 


USA 

Jan. 4, 2019 (Western Union Business Solutions)  – The U.S. dollar ticked lower as risk appetite improved after a gangbusters U.S. jobs report tempered worries of a moderating economy and validated Fed forecasts of higher interest rates this year. America added a whopping 312,000 jobs in December, the most in 10 months. Unemployment rose by two ticks above 49-year lows to 3.9% but for good reason as it reflected a larger workforce. Wages unexpectedly increased, rising to an annual rate of 3.2% versus forecasts of 3.0%. While constructive for the dollar, the data won’t remove the cloud of political uncertainty over Washington amid a partially closed U.S. government, which suggests limited upside for the buck.

 

GBP

 

Sterling caught a boost after U.K. services data topped expectations, an outcome that surprised to the upside and helped the pound recover from a flash crash-induced slide this week to April 2017 lows. Britain’s economy-driving services industry closed out 2018 on firmer footing with the PMI rising to 51.2. Support from the data may not last long for sterling given the still unsettled situation in Britain over Brexit.

 

EUR

 

The euro fell after bullish U.S. jobs data stood in contrast to weaker inflation numbers from Europe that kept a near-term rate hike by the ECB off the table. Inflation in the euro bloc slowed to an annual rate of 1.6% last month, down from 1.9% in November, the weakest in 8 months. The less volatile core number steadied at a low 1%.

 

CAD

 

Canada’s dollar rose above 1 ½ year lows thanks to stronger oil markets and faster hiring last month. Canada added 9,300 jobs in December, above forecasts of 5,500, though a marked slowdown from the record spike of more than 94,000 in November. Unemployment stayed at 5.6% compared to forecasts of a modest uptick. A closer look at the data showed that all of the hiring came from the less meaningful part-time positions, suggesting limited support to the loonie.

 

Jan. 2, 2019 (Western Union Business Solutions)  – The U.S. dollar fared mixed on the first trading day of 2019. The dollar rallied against its European counterparts, hit a seven-month low against the yen and was little changed against the Canadian dollar. It may be a new year but the same uncertainties continue to dog global markets. Disappointing data from China and Europe added to mounting signs of a moderating world economy, a risk-averse backdrop that supported safe bets like the U.S. and Japanese currencies. The broadly weighted U.S. Dollar Index appreciated 4% in 2018 which proved its strongest year in three. Yet the U.S. currency finished 2018 in second place as it took a back seat to the yen which thrived as a haven destination from global stock swings and moderating expectations for U.S. growth and higher interest rates this year. This week’s main event will be America’s jobs report on Friday that’s forecast to show faster hiring in December.

 

USD

 

The dollar caught a safe haven boost with global markets in the red in the wake of dismal data from China and Europe. The coming year could prove more challenging for the dollar should the U.S. economy slow and throw a wrench in Fed plans to continue to lift borrowing rates in 2019. America’s jobs report Friday will be important for the buck’s early 2019 prospects as labor market strength and the lowest unemployment in 49 years have the Fed penciling in higher interest rates this year.

 

JPY

 

The yen kept in pole position after gaining against the otherwise stronger greenback in 2018. A messy global backdrop of moderating growth and political uncertainty in Britain and beyond continues to stoke demand for safer plays like the yen which clocked a seven-month high on the first trading day of 2019. Until market risk factors subside, the path of least resistance appears higher for the yen.

 

EUR

 

The euro started the year with a plunge after disappointing factory data from the Top 4 euro zone economies weighed. The big blow came from manufacturing data from France and Italy that showed growth below the boom or bust level of 50. With factory growth in the red in the bloc’s Nos. 2 and 3 economies, it underscored the dovish outlook for ECB policy, a chief source of euro weakness.

 

CAD

 

Canada’s dollar steadied out of the 2019 gates but its outlook remained fraught with negativity with oil markets in the red. Sliding oil prices signal a weaker outlook for global growth, a scenario that suggests a closed door for the Bank of Canada to raise borrowing rates this month or any time soon. Canada on Friday will release the nation’s December jobs report that’s forecast to show a marked slowdown in hiring to around 5,500 jobs after a record gain of more than 90,000 in November.

Dec. 19, 2018 (Allthingsforex.com)  – The EUR is giving up gains following the Federal Reserve’s decision to raise rates by 0.25% today.

At the moment, the EUR is fluctuating around 1.1385.

With another two or three Fed rate hikes expected in 2019, while the European Central Bank keeps rates unchanged until next summer, we could see the USD maintaining its bullish stance into the first half of the new year.

Below is the official statement published by the FOMC earlier today:

“Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.”

 

Dec. 13, 2018 (Western Union Business Solutions)  – The U.S. dollar was mostly flat as market attention remained focused on Europe. Britain’s pound held its chin above 20-month lows after Prime Minister Theresa May won a key confidence vote which bought the U.K. unit some breathing space. The euro steadied after the ECB left its borrowing rates unchanged and announced it would retire its monthly QE stimulus at month-end. Canada’s dollar was pinned near recent lows as weaker oil prices below $51 weighed on commodity assets. The FX market will look for a catalyst today in the ECB’s post-meeting news conference. The 19-nation central bank will also unveil fresh forecasts for growth over the coming year. Any tone that plays up greater economic uncertainty would strike a dovish chord that could tighten a lid on the euro.

 

USD

 

America’s economy flashed mixed signals that proved neither a buy or sell signal for the U.S. currency. The job market turned in another strong showing as weekly jobless claims fell more than expected to 206,000 in the last week, the lowest since the late 1960s. But import prices, a key gauge of inflation, took a 1.6% plunge, the most in over three years which offered evidence of the strong greenback putting downward pressure on inflation. Lower inflation backs the view of the Fed slowing the pace of rate hikes next year, a narrative that’s dollar-negative.

 

EUR

 

The euro weakened after the ECB left interest rates unchanged and announced the end of its monthly bond buying stimulus at year’s end. The bank’s forecasts for the economy were mixed and largely offset, expecting slightly lower growth this year but higher inflation. Mr. Draghi, the president of the ECB, reiterated that the area borrowing rates wouldn’t rise until after next summer, at the earliest. Mr. Draghi’s message mostly met markets’ dovish expectations and therefore hasn’t proven a catalyst for a meaningful euro decline.

 

GBP

 

Sterling held above 20-month lows but continued to nurse losses on the week, a day after most members of Theresa May’s Conservative Party maintained confidence in her leadership. The vote showed that 200 of the 317 members of the Conservative Party maintained their faith and confidence in Mrs. May’s leadership, despite the still-uncertain road ahead for Brexit. But the fact that so many of her colleagues (i.e. 117 or more than a third of the party) expressed no confidence in the premier, it did little in inspire optimism in Mrs. May’s Brexit bill eventually passing Parliament. As long as the risk of a hard, potentially economy-damaging Brexit remains on the table, the path of least resistance appears lower for the pound.

 

CAD

 

Canada’s dollar kept close to recent 1 ½ year lows as the price of oil, a key commodity that Canada produces and exports, shed a percent to $50. Investor appetite for risk also cooled, as evidenced by Wall Street futures pointing to a subdued start to trading. For the most part, USDCAD is pinned near mid-2017 peaks as global risks outweigh expectations for Canada to remain on a path of gradual interest rate rises.

Dec. 10, 2018 (Western Union Business Solutions)  – A mixed U.S. dollar soared to fresh highs against the politically-weakened U.K. pound. The dollar’s nearly 1% rise against sterling to fresh 1 ½ peaks translated into a general boost. Still, the euro pushed higher, taking out resistance to notch its highest in three weeks. Weaker oil below $52 weighed on Canada’s dollar. Sterling plunged on reports that embattled U.K. prime minister may postpone a crucial parliamentary vote on her unpopular Brexit deal. The news heightened political risk as it kept alive fears of Britain crashing out of the EU. The gain against the pound offered support to the dollar whose popularity has waned as mixed U.S. data has dampened expectations for the Federal Reserve to raise interest rates next year. Europe dominates market focus this week with the ECB mulling its final policy decision of the year Thursday. Next week it will be all about the Fed.

 

CAD

 

Canada’s dollar weakened after a jobs-inspired rally Friday. November proved a banner month for Canada when it hired a record number of jobs (more than 94K), a staggering amount that lowered the nation’s jobless rate by two notches to 5.6%, also an all-time best. The data kept the door cracked for the Bank of Canada to raise borrowing rates from 1.75% as soon as the first quarter of 2019. Still, one report doesn’t make a trend. Meanwhile, weaker oil prices below $52 added to the loonie’s softer start to the week.

 

EUR

The euro climbed to three-week highs as the single currency continued to benefit from markets’ dovish repricing of expectations for U.S. interest rates next year. The market largely concedes a Fed rate hike next week, but it wouldn’t be a total surprise if the Fed should get cold feet following cautious remarks from several policymakers. While stronger, the euro could see two-way volatility this week with the ECB issuing its final decision of the year on Thursday. No rate changes are expected but the central bank is likely to announce the end of its QE stimulus at year’s end. Any cautious commentary from ECB President Mario Draghi could weigh anew on the euro.

GBP

Sterling slid to June 2017 lows against the greenback on reports that Britain may postpone a parliamentary vote set for Tuesday on the prime minister’s Brexit plan amid a lack of support. Failure to pass the deal would raise already elevated political risk, a leading source of sterling weakness, and keep dire scenarios on the table such as but not limited to Britain crashing out of the EU without a deal, early elections, or a second Brexit referendum. Failure to pass the deal could also be the pound’s ticket substantially lower.

 

USD

 

The broadly weighted dollar index ticked higher, thanks mostly to its outperformance against sterling. Underlying dollar sentiment remained in the dumps after it depreciated nearly 1% last week for its worst week in more than three months. The dollar has fallen prey to markets’ dampened expectations for the Fed to raise rates next year. Fundamental keys for the buck will be gleaned in U.S. data this week on consumer prices and consumer spending, critical numbers that will add to the debate about whether the U.S. economy is in better or worse shape than many believe.

Dec. 7, 2018 (Western Union Business Solutions)  – The dollar slid in knee jerk fashion after U.S. hiring proved less than expected which gave traction to concerns of a moderating economy. America netted 155,000 jobs in November, below forecasts of 200,000. Unemployment and wage growth steadied at 3.7% and 3.1%, respectively. While job growth fell short of forecasts, the gain of more than 150,000 is still consistent with the labor market firing on most cylinders. The dollar looks set for more choppy trade as markets seek answers to whether the U.S. economy is stronger or weaker than it thinks.

 

JPY

 

The yen steadied after an overnight surge to one than one-month peaks. Sliding U.S. Treasury yields have diminished the dollar’s allure, easing pressure on lower yielding rivals like the yen. The Japanese currency is also benefiting from persistent trade war fears as risk averse shift toward traditional safe harbors. The yen should takes its cues today from Wall Street whose rebound after the U.S. jobs report should limit demand for safer bets.

 

EUR

The euro hovered toward the top of a confined range against the greenback ahead of America’s monthly jobs report. Reports that the Fed may adopt a slower, wait-and-see attitude toward interest rates next year weighed on the dollar to the benefit of rival currencies such as the euro. Still, the euro so far has lacked the momentum to push meaningfully higher amid mounting evidence of a slowing euro zone economy. Data today from Germany showed a surprise contraction in industrial orders in October. The ECB, which holds its final meeting of the year next week (Thu, Dec 13), could set the euro in motion. The bank is expected to announce the end of its QE stimulus at year-end. Any dovish tone that plays up economic headwinds would leave the euro vulnerable.

CAD

 

Canada’s dollar soared above 1 ½ year lows after a blockbuster jobs report kept the door ajar for the Bank of Canada to raise borrowing rates. Canada netted a massive 94,100 jobs in November, a robust amount that knocked unemployment two ticks lower to 5.6%, the lowest since 1976. The quality of the report was strong as most of the hiring came from the more meaningful full time jobs. The bullish jobs report bodes better for the BOC to raise borrowing rates during the first quarter of 2019 given its data dependent stance. While stronger, the loonie isn’t out of the woods and could see a meaningful swing if OPEC announces a cut in oil production. A forceful move that shores up sagging oil markets would risk a stronger recovery in the Canadian dollar.

Dec. 3, 2018 (Western Union Business Solutions)  – The U.S. dollar dove into December after a cooling in the U.S.-China trade war spurred a ferocious risk rally. The mostly weaker dollar sank against the Aussie and kiwi dollars and registered its deepest losses versus higher-yielding emerging markets. Canada’s dollar soared to two-week peaks as oil prices skyrocketed nearly 4% to just below $53. The U.S. and Chinese presidents agreed to a 90-day ceasefire in their trade feud, with the former vowing not to raise tariffs on Jan. 1, with the latter agreeing to buy more U.S. goods. The temporary truce was enough to unleash a strong global market rally at the safer buck’s expense. Scope for dollar weakness is likely to hinge on the strength of U.S. data this week that could cement a fourth interest rate hike from the Fed this year in a little over two weeks.

 

EUR

 

The euro ticked higher against the U.S. dollar though it ceded some strength, a reflection of investor unease over elevated political risk across the Continent. The market is cautiously hopeful that Rome and Brussels will reach a compromise in their budget feud. Still, recent data from Europe have been less than encouraging, which has raised questions about whether the ECB will be able to increase borrowing rates next year.

 

GBP

 

Sterling underperformed against the weaker U.S. dollar as Brexit developments weighed on sentiment. The U.K. Parliament on Dec. 11 is expected to vote on Prime Minister Theresa May’s Brexit proposal. Failure to pass Parliament could trigger a leadership challenge, a scenario that’s keeping pound-negative political uncertainty elevated. GBPUSD hit a five-week low, moving it closer to 2018 lows hit in August.

 

CAD

 

A 1% rally propelled the Canadian dollar to its highest in two weeks. Currencies with the closest links to global growth are faring the best today thanks to weekend progress on the U.S.-China trade war. The loonie added to its gains after oil prices soared nearly 4% to close to $53. Upside could prove limited for the loonie at least ahead of the Bank of Canada’s policy decision on Wednesday at 10 a.m. ET. Central bankers are expected to keep rates unchanged at 1.75% after data last week showed Canada’s economy slowed during the third quarter and went backwards in September.

 

ZAR

 

South Africa’s rand rallied more than 1% to its highest in nearly four months against the greenback. Other riskier, emerging markets also strengthened like currencies from Mexico, China and Turkey. Investor angst over the U.S.-China trade war has diminished. The rally for risky assets may not last long since the G20 only helped to allay trade tensions, not eliminate them altogether.

 

USD

 

The dollar Monday was mostly weaker with its biggest losses coming against peers with close ties to global growth. The dollar has benefited as a safe bet from the U.S.-China trade war so the cooling in tensions has led to some unwinding of those positions. The dollar’s weaker tone follows its performance last week when it lost ground on the perception the Fed may shift to a slower pace of rate rises given that policy in near a neutral level. Key events for the buck this week will be congressional testimony on the U.S. economy by the Fed chairman Wednesday and Friday when America’s November employment report is due. Any softness in data would further dampen confidence in U.S. rate hikes next year and leave the dollar vulnerable.

 

Nov. 27, 2018 (Western Union Business Solutions)  – The U.S. dollar was mostly steady while the U.K. pound broke below support, hitting its lowest level in nearly two weeks. The greenback otherwise was little changed against the euro, yen and Canadian dollar. Broader market sentiment was subdued following a strong day on Wall Street. The dollar remains well supported by elevated political uncertainty in Europe. Still, dollar gains have been capped by caution ahead of a speech Wednesday, at noon ET, by Jerome Powell, the head of America’s central bank. There’s a risk that Mr. Powell could tone down his optimism about the U.S. economy with global growth showing steady signs of slowing. Lots of risk events loom over the balance of the week, including Thursday when the U.S. issues data on the consumer, inflation and the minutes of the last Fed meeting, and Friday when the G20 meets in Argentina where President Trump and China’s president are expected to discuss their trade feud.

 

GBP

 

The pound ‘s 0.5% slide led major currencies lower, underscoring how the weekend Brexit agreement between the U.K. and EU didn’t prove to be a game changer for sterling. Moreover, comments from President Trump this week highlighted an uncertain outlook for trans-Atlantic trade to the detriment of the pound. It may be a while yet before Britain can negotiate trade deals with its non-EU counterparts.

 

CAD

 

Canada’s dollar steadied after an overnight brush with one-week lows. Oil prices softened after a Monday rally which kept commodity currencies on a vulnerable footing. Oil’s recent slide to almost below $50 from above $75 in recent weeks was the chief catalyst that knocked the loonie to late June lows last week. Canadian growth data Friday will shed some light on the local interest rate outlook, a narrative that’s proven loonie-positive following five rate increases by the Bank of Canada since mid-2017.

 

EUR

 

Like sterling, the euro also flirted with two-week lows against the greenback. The euro’s quick start to the week faded after remarks from Mario Draghi, the president of the ECB, played up economic fragility. Mr. Draghi’s comments Monday came on the same day that Germany released another lackluster report on business confidence. Meanwhile, Italy’s precarious budget situation has done little to inspire buying of the single currency.

Nov. 15, 2018 (Western Union Business Solutions)  – Sterling was spellbound, alternating between gains and losses, after Britain’s Brexit minister resigned. Heightened political uncertainty in the UK kept the pound on volatile ground. In the face of much scepticism amongst her own government, UK Prime Minister Theresa May was able to jump the first hurdle of many by securing cabinet approval of her draft Brexit agreement. GBP/USD oscillated between gains and losses in choppy trading, lacking any directional impetus either way. GBP/EUR continued to wrestle with a key level but was still unable to close above it – a feat last achieved in April. Despite approval from the cabinet, expected resignations by disgruntled cabinet ministers weighed on Sterling. The threat of hard-line Brexiteers calling for a no-confidence vote on Ms May could also derail Brexit developments and send Sterling southwards.

 

Today, Ms May will present the draft Brexit deal to the House of Commons and a vote in parliament is expected in December. There is increasing doubt over the divorce deal passing through parliament, which is unnerving investors and limiting Sterling gains. According to a Reuters report, demand for Sterling put options (the right to sell Sterling) is increasing, which is a tell-tale sign that market participants lack confidence in the pound recovering. UK retail sales for October unexpectedly fell by 0.5%, adding to the pound’s shaky bias. Yesterday, Sterling shrugged off inflation data, which held steady at 2.4% in October rather than rising to 2.5% as forecast. It appears that Sterling volatility is directly correlated to Brexit news though, leaving GBP traders vulnerable to both substantial upside and downside risk.

 

USD

 

US inflation increased by the most in nine months in October, which helped to temporarily stall the US Dollar’s recent decline from traders’ taking profit. The consumer price index rose by 2.5% from 2.3% y/y, encouraging investors about a path of gradual rate hikes by the US Federal Reserve. The US Dollar index, which tracks the dollar’s value against a basket of six currencies, powered to over 16-month highs on Monday, which prompted investors to take profit on the move higher, in other words selling the dollar and thus weakening it. However, despite dropping slightly, the US Currency remains near 2018 highs against its major currency rivals such as the Euro, Yen, Sterling and Canadian Dollar. The US today issues its monthly report on retail sales at 8:30 a.m. ET. Forecasts predict brisk spending of 0.5% in October, from the previous month’s 0.1% increase. Evidence of faster consumer spending, the main engine of US economic growth, would tend to be dollar-positive and a potential catalyst to keep the US unit near 2018 peaks.

 

EUR

 

The Euro attempted a further recovery yesterday following the relatively positive Brexit developments, however upside appears limited in the wake of the continued standoff between Rome and Brussels regarding Italy’s budget proposal. Italy ramped up tensions by re-submitting its budget plan to the European Commission with no changes to its deficit or growth targets. The original proposal was rejected by the Commission last month as it broke EU fiscal rules and therefore disciplinary steps may now be taken against Rome, which could result in a weaker Euro. The uncertainty and hostility rumbling on in Europe is unnerving investors and putting increased downside pressure on the common currency. EUR/USD momentarily recaptured a key level, which appears to be a level of both support and resistance. Meanwhile, data yesterday revealed the Eurozone grew at the slowest pace in four years in the third quarter. GDP in the common currency bloc expanded by just 0.2% between July and September. The slowing economic growth combined with the jitters resurfacing from Italy could force the European Central Bank to postpone its planned monetary tightening next year might, which would also hurt the Euro in the long run.