At a dinner in Frankfurt organised by
a German newspaper on Monday of this week, Mario Draghi
is quoted as saying that an economic recovery is now underway in the Eurozone,
thanks to the stimulus provided by the actions of the ECB.
(That was fast. QE only started on
March 9th).
The speed of the fall of the Euro has
taken many by surprise. And a weaker Euro, although exchange rates are not in
the mandate of the ECB, can only assist in achieving the objectives of the
central bank, which is to raise inflation. Mr. Draghi admitted also that the
low and still falling price of oil is another factor in raising prospects for
any region that relies on imports for its energy needs, as Europe does.
Figures out yesterday for both
inflation and economic sentiment support Mr. Draghi’s words. The Core Consumer
Price Index rose 0.7%, when 0.6% was expected, and the ZEW survey of economic
sentiment for the Eurozone as a whole came in at 62.40, when 58.90 was
expected. His other comments, calling for greater integration of the member
states in order to share sovereignty and strengthen the rules governing the
operation of the Eurozone, however, may not be immediately adhered to.
Markets
quiet as we await the FOMC
Forex markets were quiet yesterday
and are expected to be so today, at least up to the time of the FOMC monetary
policy statement and press conference, which are due to take place later today. We are waiting to see if the committee uses
the word “patience” in relation to its stance on normalisation, or the commencement
of a rise in core interest rates in the US. It has become widely accepted that
the non-use of that word in the policy statement would indicate that rate rises
will start after another two meetings have taken place. But nothing is
guaranteed. The recent strident moves that have been made by the US dollar
against all its global counterparts, coupled with low inflation and wage
growth, could be construed as placing a constraint on economic improvement
Stateside, and so result in a continuation of the easing for some time longer.
No comments:
Post a Comment