Advance in inflation across the Eurozone

20 January, 2017

ECB meeting

Euro holds gains against the US Dollar ahead of the ECB rate decision, as majority of economists expect no major updates in the policy, while investors will be taking stock of Draghi rhetoric’s to foresee the timeframe of the next big move by the policymakers.

Monthly increment of ECB’s balance sheet remains at 80B Euros until March and will be decreased to 60B from April to December according to the past economic bulletin. Investors will scrutinize Draghi speech before media on signals for abstention from further stimulus or reducing its size, what can potentially lead to resurgence of Euro considering, how now it trades on multi-year low against the US Dollar. And the expectations are quite justified considering there has been substantial advance in inflation across the Eurozone with 1.1% December YoY growth. Individually in Germany it rose to 1.7% quite near the ECB’s 2% target rate. As the EU economy, has gained substantial momentum it puts pressure on Draghi to take action, although ECB confidence in the economic growth is yet to be cleared on today’s meeting.

Sterling

The Pound saw a second wave of bulls’ attention on Thursday, as the currency added 0.65% rising above the 1.23 level. Political uncertainty over Brexit has been cleared up and the UK economy is showing signs of consistent growth it may be reasonable to consider betting on further Pound rally.

US Dollar

The Greenback supports from Yellen speech has dissipated as basically her statements contained nothing new and confirmed FED continues to exercise caution in unwinding monetary support. Dollar index rose to 101.20 but later found equilibrium point near a 101 level.

Crude Oil

Oil prices continue to hold in a range of $51-55 denoting a balance of output cuts from OPEC and pushing US shale producers. EIA report on Crude inventories in the limelight, which is likely to confirm a downbeat preliminary data from the American Petroleum Institute.


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