ECB: The message was more dovish than expected - BBVA

Matías Salord FXStreet

According to the Research Department at BBVA, the European Central Bank did not disappoint today and delivered a more dovish-than-expected message.

Key Quotes:

“The ECB has not disappointed: it will keep interest rates on hold until at least the end of this year and has announced another series of auctions of long-term liquidity. The dovish tone was retained as the statement reiterated that the GC stands ready to adjust all of its instruments, as appropriate, to ensure sustainable convergence towards the inflation target. Mr Draghi stressed that this package of measures are “adding accommodation” to its accommodative policy stance and the decision was taken by unanimity. But there there was debate within the GC as several members proposed extending the calendar of forward guidance to
March 2020 and other members discussed consequences of “low for longer” rates on banks.”

“On the economic outlook, the ECB mentions that the slowdown in international demand along with some country and sector specific factors have resulted in weaker-than-expected growth since mid-2018 that seems to extend into this year. As a result, the GDP growth forecast was revised sharply downwards by 0.6pp to 1.1% in 2019, but the revision was much more moderate for 2020, by 0.1pp, to 1.6% and it remained unchanged for 2021 at 1.5%, which implies that a reacceleration is still expected at some point during 2019. But, in contrast, Draghi highlighted also that the balance of risks remains tilted to the downside despite the downward revision, as today’s ECB’s decisions cannot solve global headwinds (Brexit, protectionism, emerging market vulnerabilities or the slowdown in China and the US), which are the main ones hitting the Eurozone.”

“All in all, the message from the ECB has been more dovish than expected, as the ECB reacted to the gloomier picture of the Eurozone economy with a combination of a delay in the rate hikes, significant cut in projections and a further TLTRO package that -though many details are lacking- provides more liquidity than expected.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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.