Publicado: Sol, Marcha 11, 2018
Financiera | Por Marilu Caballero

European Central Bank ever so slowly edges closer to interest rates rise

European Central Bank ever so slowly edges closer to interest rates rise

Euro/dollar traded lower at 1.2370 (-0.34%) ahead of the European Central Bank rate announcement where any clues on the ECB's plans to change its forward guidance on monetary policy could bring fresh volatility to the currency. The ECB President Mario Draghi said a year ago that the bank had defeated the threat of deflation.

The ECB's key message is that the asset purchases will continue at least until September with tapering in Q4 still appears to be likely scenario if inflation forecast remains muted for now.

'The ECB, as expected, tweaked their policy guidance to drop the so called easing bias, meaning a willingness to increase the size and duration of the QE asset buying programme if necessary. It would be interesting though to see whether policymakers are preparing the ground to exit stimulus, something that has been recently echoed.

The given reason for scaling back stimulus expectations was an improving outlook for Europe's economic growth and inflation rate.

At the same time the US Dollar is a holding pattern this morning as markets remain cautious following Trump's signing of an order introducing trade tariffs on metal imports. And at this stage in the economic cycle, growth can become fragile very quickly.

The highlight in the economic calendar on Thursday is weekly USA initial jobless claims - which are a prelude to the monthly jobs report on Friday - at 1330 GMT.

Last week the S&P 500 fell 1.3% on fears of a global trade war as Trump announced the U.S. was adopting tariffs of 25% on steel and 10% on aluminium.

To assess what kind of market reaction we see from the data, we should consider first why it matters rather than what degree of surprise the data reports.

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Another man said there were 15 families in the basement who have been hiding for days. Residents fleeing the government's advance in other towns had sought refuge in Douma.

"While dropping a sentence that has been in the ECB's statement since 2016 is a significant change, Draghi gave his best trying to downplay exactly this significance during the press conference", said Carsten Brzeski, eurozone economist at ING.

The pass-through of the monetary policy measures put in place since June 2014 continues to significantly support borrowing conditions for firms and households, access to financing ‒ notably for small and medium-sized enterprises ‒ and credit flows across the euro area.

He also talked about the impact a trade war could have...

But it was on the path of policy tightening that Draghi dialled back the most on.

With regard to inflation expectations, the European Central Bank foresees the annual Harmonised Index of Consumer Prices (HICP) inflation at 1.4 percent in 2018, 1.4 percent in 2019 and 1.7 percent in 2020. The AUD/USD dropped as much as 0.8 percent through Thursday's active session, furthering a tightening range that started with the late-January reversal from 0.8135. USA gold futures were down 0.4% at $1,321.80.

Even in the case of a weaker than expected labour report today, we do not expect much of a negative reaction in the greenback, given the market is now placing a 100% chance of an interest rate hike from the Federal Reserve at its March meeting. The French CAC 40 rose by 0.22% lifted by utilities, the Italian FTSE MIB 100 climbed by 0.17% and the UK's FTSE 100 was flat.

Half an hour before the close of trade on Thursday, the EuroStoxx 50 was up 1.05% at 3,415.

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