ECB (European Central Bank)
ECB’s Villeroy: Downside risks to inflation remain as significant as the upside risks.
European Central Bank (ECB) and Bank of France Governor Villeroy de Galhau said on Friday that their current "good position" of ECB policy does not mean a comfortable or fixed one at a conference in Paris.
ECB’s Cipollone: There are still many risks in the pipeline
ECB executive board member Piero Cipollone said in an interview with Nikkei during the European trading session on Thursday that monetary policy adjustments would be required if economic conditions don’t act in line with expectations.
ECB’s Lagarde: Underlying inflation remains consistent
ECB President Christine Lagarde said that growth in economic activity should benefit from increased household spending and a resilient labor market, testifying before the Committee on Economic and Monetary Affairs of the European Parliament, in Brussels on Wednesday.
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AUD/USD turns sideways around 0.6660 as rally hits pause
The AUD/USD pair turns sideways as the three-week rally hits a pause after posting a fresh three-month high at 0.6686 on Wednesday. During Friday’s early European trading hours, the Aussie pair trades calmly near 0.6660. The pair struggles to extend its advance after the release of the unexpectedly weak Australian labor market data for November.
EUR/USD struggles for direction amid USD gains
EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.
Gold poised to challenge record highs
Gold prices added roughly 3% in the week, flirting with the $4,350 mark on Friday, to finally settle at around $4,330. Despite its safe-haven condition, the bright metal rallied in a risk-on scenario, amid broad US Dollar weakness.
Week ahead: US NFP and CPI, BoE, ECB and BoJ mark a busy week
After Fed decision, dollar traders lock gaze on NFP and CPI data. Will the BoE deliver a dovish interest rate cut? ECB expected to reiterate “good place” mantra. Will a BoJ rate hike help the yen recover some of its massive losses?
Big week ends with big doubts
The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.
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what is the ECB?
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone. With its beginnings in Germany in 1998, the ECB's mandate is to maintain price stability in the Eurozone, so that the Euro's (EUR) purchasing power is not eroded by inflation. As an entity independent of individual European Union countries and institutions, the ECB targets a year-on-year increase in consumer prices of 2% over the medium term. Another of its tasks is controlling the money supply. This involves, for instance, setting interest rates throughout the Eurozone. The European Central Bank's work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde has been the President of the ECB since November 1, 2019. Her speeches, statements and comments are an important source of volatility, especially for the Euro and the currencies traded against the European currency.
who is ECB's President?
Christine Lagarde was born in 1956 in Paris, France. Lagarde, who graduated from Paris West University Nanterre La Défense, became President of the European Central Bank (ECB) on November 1, 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund (IMF) between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007-2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005-2007).
Lagarde on How to trade the ECB interest-rate decision
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Prior to the rate decision:
- Many traders buy the rumors and square their positions shortly after the decision is made. For instance, if the market believes that the European Central Bank (ECB) will hike interest rates, traders buy the Euro (EUR) and close the position shortly after the announcement. On the other hand, if the expectation is a rate cut, traders will short the Euro and square the position after the announcement.
After the rate decision:
- If the market's expectations differ from the actual rate decision, there can be some excellent trading opportunities.
- If the market expects a rate hike but the European Central Bank ends up cutting rates, a short-term (1-2 hours) selling the Euro could be successful.
- If the market expects a rate cut but the ECB raises rates, a short-term long position on the Euro (1-2 hours) may be advantageous.
More generally, relatively high interest rates will usually result in a stronger Euro and vice versa.
Hike, cut or keep interest rates unchanged
The European Central Bank's (ECB) decision on interest rates always has an effect on the Euro (EUR).
When interest rates increase, the European Central Bank is selling government securities to large financial firms. In turn, the financial organizations are paying in euros for these securities. This effectively decreases the amount of currency circulating in the economy. A decreasing supply leads to higher demand and therefore causes the value of the Euro to appreciate.
When the interest rates decrease, the European Central Bank floods the market with euros. This is done by purchasing government securities from financial organizations. In return for the securities, these banks and financial deals are paid in euros, therefore increasing the supply of euros in the economy. As supply increases, the value of the Euro depreciates.
the world interest rates table
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
some concepts you need to know
In practical terms, QE means that central banks create money out of nothing to buy securities, such as government bonds. This new money swells the size of bank reserves by the quantity of assets purchased and that's why this programme is called Quantitative Easings. The money supply is intended to flood financial institutions with capital in an effort to stimulate lending and increase liquidity.
Much of the governments' debt is held by banks in the Eurozone and the ECB wants them to give more credits. If the European Central Bank buys government bonds, their prices rise and profitability drop even more. This is a liquidity-providing operation that weakens the value of the euro. This depreciation makes European exports cheaper and competitive, and ultimately, helps in recovering. In addition, as a result of the stimulus to internal and external consumption, the ECB combats the risk of deflation, a widespread and prolonged drop in prices, as well as the high unemployment.