All eyes on the ECB

Their economists expect the ECB to ease monetary policy at its meeting later today by cutting interest rates (the refi rate from 0.25% to 0.10% and the deposit rate from 0% to -0.10%) and announcing further measures to relieve bank credit constraints.

Recent data have confirmed the prevailing disinflationary pressures, and although a moderate recovery is under way, forward-looking indicators, eg, the PMI surveys, suggest no acceleration in sight.

As rates and credit already price in rate cuts and some credit easing measures, Barclays sees more scope for a larger move down in the EUR and a rally in equities.

They recommend shorting the EUR vs the JPY on account of our view that a bottom in the JPY looks closer at hand.

The weakening in European growth momentum has important implications for the cross-regional asset market rally and our bullish European views, particularly given the fall in the manufacturing PMIs to a six-month low, and following disappointing Q1 GDP growth numbers.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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