Launching the Euro Chopper?

21 April, 2016

Having supposedly thrown everything at the deflationary problem at their early March meeting, there is little expectation that the ECB is going to have anything substantial at today’s gathering to present to markets. Instead, we’re likely to get a PR job on the signs that the stimulus policies seen over the past year are having an effect. So far, that’s not really been evident in the inflation numbers or the real economy. The latest credit conditions survey from the ECB showed some signs of improvement, such as a further compression of lending rates and easing in terms and condition on lending. There remains the usual risk of volatility on the currency on ECB days. As with Japan, it’s not behaved in the way that the central bank would have liked, given the swathe of measures announced. In broad trade-weighted terms, the currency is up around 1.8% since the last meeting, with that representing the majority of the appreciation seen so far this year. As yields on bonds become even lower (or negative in many cases) it’s not surprising that QE is not impacting the currency in the same way as before. Furthermore, the effectiveness of policy when yields are already so low is questionable. There has been more talk of so-called ‘helicopter money’ in recent weeks, in other words putting money directly into the hands of households as a way of stimulating the economy. I would not be surprised at all to hear Draghi questioned about that today. But it’s far too unconventional for the ECB to be considering at this point in time and there are naturally barriers in terms of blurring of lines between fiscal and monetary policies.

The ECB meeting dominates the data calendar, with just UK retail sales at 08:30 GMT grabbing the attention. Sterling continues to be in corrective mode, with buyers quickly emerging at the lows after the weaker than expected labour market data yesterday. As I’ve mentioned before, it’s trading more like a risk currency than a safe haven (but it’s never been either) hence the tendency to buy the dips. On the majors, the Aussie is currently stalling above the 0.78 level, whilst the reversal on USDJPY has pushed it back to the 110 level.


Source link  
US Inflation Disappoints

US Consumer Price Index data was released and failed to impress the markets. With US gasoline prices spiking, following the disruption caused by the recent Hurricanes...

Can CPI Follow PPI Lead?

In early Friday trading, the markets are relatively static as they wait, in anticipation, for today’s US inflation data that will potentially give confirmation...

Fed Minutes: Inflation Conundrum

USD broadly declined as the markets digested the release of last month’s FOMC meeting minutes. Many FOMC Members are still concerned...


UK output data falls but expectations rise

On Sunday, The Confederation of British Industry released their monthly indicator of output for UK manufacturers, retailers and service companies...

US Economy Growing Faster Than Forecast

Data released on Thursday indicated that the US economy grew at a faster pace in Q2 than expected. The US Commerce Department released...

New Fiscal Year Could See Changes

With many countries entering a new fiscal year in October, many investors are summarising this past year’s portfolio performance while setting new goals...


New US data did not add positive

Published data on construction activity in the US in August slightly exceeded expectations. The number of building permits reached...

Interest Rates in Focus

On Monday, at a speech at the International Monetary Fund in Washington DC, Bank of England Governor Mark Carney stated that any increases in UK interest rates in the future will be both...

US Data Fails to Impress

On Friday, the US Commerce Department released Retail Sales showing a drop of 0.2% in August, the biggest decline in 6 months. The markets had expected...

  


Share: