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EU Sentix Investor Confidence higher in July; ECB takes a ‘wait and see’ approach to any policy change

Jul 10 • Morning Roll Call • 208 Views • No Comments

On Monday we have seen a rather quiet day regarding the macro-economic news, with the EU investor morale in the center of attention. The EU Sentix investor confidence rose in July, showing a higher investor morale and ending a 5 month decline. However, according to Reuters, Sentix research group sees the threat of escalating trade tensions with the US affecting the sentiment again. Sentix index reading came at 12.1, as opposed to the expected 9.0, however there are fears that the US President Trump may target the European car industry, thus the dispute can lead to another slowdown in the economic sentiment. The threat came last month of imposing 20% import tariff on all EU vehicles and this may negatively affect the EU current business model for selling cars in the US.

Another anticipation regarding the EU is the European Central Bank decision on its monetary policy and according to the ECB’s Governing Council member, Ewald Nowotny, the stance that the ECB is taking at the moment is to ‘wait and see’ approach towards the tightening of the policy after it keeps negative rates on hold throughout the summer following year. As mentioned before, the European Central Bank would end the bond purchasing program by the close of 2018, however the rates should remain unchanged until next summer. In addition, according to Reuters, ECB President Mario Draghi stated on Monday that the ECB sees a European Deposit Insurance Scheme as a crucial part towards supporting depositor confidence in their bans across the EU, and has renewed his appeal towards strengthening the euro zone’s bailout fund and for a common stabilization function to support the economy during euro-wide recessions.

Breaking news came from the UK on Sunday, after Brexit Minister David Davis resigned overnight. As Reuters reported on Monday, the European Commission will continue the negotiations with the British government regardless the leave. In addition, the spokesman of British Prime Minister May had stated that her cabinet had agreed its Brexit negotiating stance and would press ahead with the EU as the UK has stated their position and is expecting the EU to move ahead. It appears that there is no intention to diverge from the UK government negotiation position regardless the resignation of its Brexit minister. How the situation will evolve it is yet to be seen, shall the UK go for the soft Brexit and be willing to compromise or not?

ECONOMIC CALENDAR EVENTS FOR JULY 10th

GBP GDP m/m
GBP Manufacturing Production m/m
GBP Goods Trade Balance
GBP Construction Output m/m
GBP Industrial Production m/m
EUR German ZEW Economic Sentiment
EUR ZEW Economic Sentiment
CAD Building Permits m/m
USD JOLTS Job Openings

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