ECB and Euro

ECB in no hurry to change its monetary policy; US unemployment claims rise unexpectedly

May 25 • Morning Roll Call • 261 Views • No Comments

Yesterday, the investors were closely monitoring the ECB Monetary Policy meeting for any signs of future change that may affect the markets. However, according to the April meeting, the banks are not rushing towards any change in their monetary stance as it is now, and the underlying strength of the economy remained broadly intact. As there are first signs of wage increases in certain countries, the ECB anticipates that the increases will contribute towards a higher inflation. In addition, as stated in the ECB minutes of April meeting “members broadly agreed that an ample degree of monetary policy accommodation remained necessary to accompany the economic expansion and secure the gradual convergence of inflation to levels below, but close to, 2%. The remaining uncertainties and the still muted underlying inflation pressures continued to justify caution and underlined the need to maintain patience, persistence and prudence with regard to monetary policy”. As per Mr. Brzeski, Chief Economist at ING, not moving forward with a monetary policy change in June meeting would be the best and probably risk-free option for the ECB, where ECB President, Mario Draghi would confirm again the statement made earlier, where he does not presume a sudden end to QE in September, thus opening the door for an extension.

More news came from the US, where the unemployment claims unexpectedly rose to seven week high. The forecast was 220k, whereas the actual number came at 234k. Nevertheless, the numbers are still consistent with the strengthening labor market and the rate hike is still expected at the Fed’s meeting in June this year.
Good news came from the UK with retail sales rising by 1.6% in April, as opposed to expected 0.8%. The year-on-year retail sales rose by 1.4% last month, showing an increase in the overall economic activity of the United Kingdom.

Today the investors will be looking at the German Ifo business climate, where the survey conducted is seen as a leading indicator of economic health, and with the resent news about the slower growth of the Eurozone, this news may be a market mover. Coming after is the macroeconomic news from the UK with the revised GDP, followed by the news from the US regarding the core durable goods orders, revised UoM consumer sentiment and speeches by BOE Gov. Carney and US Fed Chair Powell.

ECONOMIC CALENDAR EVENTS FOR MAY 25th

EUR German Ifo Business Climate
GBP Second Estimate GDP q/q
GBP Prelim Business Investment q/q
GBP BOE Gov Carney Speaks
AUD RBA Assist Gov Bullock Speaks
USD Core Durable Goods Orders m/m
USD Durable Goods Orders m/m
USD Fed Chair Powell Speaks
USD Revised UoM Consumer Sentiment
USD FOMC Member Bostic Speaks

 

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