ECB Preview: All quiet on the monetary policy front until 2019

After the ECB Governing Council prolonged the asset purchasing until the end of 2018, the forward guidance on rates is set to fall asleep until Christmas.
The macro picture remained broadly unchanged since June, so policymakers might want to enjoy summertime nap in a shade.
The leaks of debate on the timing of the rate hikes reveal the argument of when is the next summer, in June meeting away from Frankfurt or in July in headquarters.

Mario Blascak, PhD Independent Analyst

The European Central Bank is pretty much done for this year and nothing really exceptional is set to be expected from the Frankfurt-based lender until the economic fundamental change. The ECB June meeting minutes disclosed that the ECB President Mario Draghi is holding on tight to his leadership position unifying the controversial voices from within.

The ECB policymakers showed unanimous support of the monetary policy proposals and even if it is highly unlikely that someone like the Bundesbank President Jens Weidmann would be fully in favor of everything the ECB minutes showed, the majority waived in favor and that is what Mario Draghi fully controls. No information leaks, no signs of dissent, unity under one command is the face of the ECB now.

That refers to the only important measure taken in June, the prolongation of the asset purchasing program duration until December 2018. Since June, there were some voices from within the ECB Governing Council hinting at what is the best time to expect the next rate hike, but some controversy was stemming from what means summer for the Banque de France Governor Villerois and what it means for the others and that is what markets might want to claim from Draghi at the press conference in July.

So the July ECB meeting should be pretty much boring, as there is not much to decide upon. Duration of the asset purchasing program had been already decided upon in June and the data dependency of the ECB repeatedly communicated since the beginning of this year means that there will not be much to talk about.

Therefore I also expect a fairly muted FX market reaction to this month’s ECB meeting press conference. Even with President Mario Draghi clarifying what precisely the summer of 2019 means, the FX market is unlikely to get overly excited in favor of Euro or entirely against it.

Recommended story

ECB Minutes show Dovish Draghi is in full control - 3 takes

Author

Mario Blascak, PhD

Independent Analyst

Dr. Mário Bla&scaron;čák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.