As expected, the ECB Governing Council decided to keep the main interest rate unchanged at a record low of 0.75% at their November monetary policy meeting. Speaking at the press conference following the meeting ECB head Mario Draghi commented on the considerations underlying the decision.
The president suggested that inflation should stay above 2% throughout the rest of 2012 and fall below 2% in the course of of 2013, adding that “over the policy-relevant horizon, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain moderate.”
Mario Draghi said that growth momentum in the Eurozone would remain weak in 2013. He assured however that ECB's monetary policy was directed at stimulating growth in the area and that its readiness to activate the OMT program was boosting market confidence.
He urged EU governments to continue reducing fiscal imbalances and applying structural reforms to strengthen growth potential in the area. He said that positive effects of the fiscal consolidation efforts so far could already be seen and that the implementation of the fiscal compact would further reassure markets.
Richard Kelly, Head of European Rates and FX Research at TD Securities comments: "We think Draghi’s remarks today suggest the Governing Council may once again see various options on the table which were not on the table before (potentially rate cuts or even LTROs given some extra talk of loan supply issues), but did not want to commit or suggest they were actually any closer to using these measures. Suggesting options are back on the table does not suggest the door is open to use them, but it is a step in that direction."
Spain sells more debt than planned at auction
The Spanish Treasury carried out a bond auction on Thursday, during which it managed to sell 4.760 billion euros worth of government bonds against a 3.5-4.5 billion target.
October 2015 Bono was sold at an average yield of 3.66% (in comparison with 3.956% seen at the previous auction). January 2018 Bono was auctioned at an average yield of 4.68% (versus 4.766%) and July 2032 Obligaciones at 6.328% (versus 4.777%)
The Spanish benchmark 10-year bond yield increased to 5.76% following the auction, from 5.69% registered on Wednesday.
Greek austerity bill approved in parliament
The Greek austerity vote, crucial if the country wants to secure a €31.5 bln bailout money, was finally approved on Wednesday as the bill reached 151 Yes votes. Media outlets like Dow Jones were first calling the vote counting too close, although the austerity measures always enjoyed a small lead against the NOs.
The spectre of receiving the next tranche of aid and avoid bankruptcy - hard to imagine as it may drag with it a few German banks - helps to kick the can down the road a bit further. EUR/USD trades heavy at 1.2770 from 1.2870s earlier in Europe, with buyers having barely reacted as positive headlines were largely priced into the market.