The ECB meeting provided little news and the introductory statement was broadly unchanged from mid-April. However, bond yields continued higher on Mario Draghi’s comments despite his continued signal of full QE implementation.
Regarding the sell-off in the fixed income markets, Draghi had clearly prepared an answer to this question and listed a number of reasons why bond yields had risen. Eventually, he concluded ‘we should get used to periods of higher market volatility’.
This clearly removed any belief the ECB may be concerned with the sell-off and was accompanied by another fierce rate increase of 10bp in 10Y Germany. The move reflects the market expecting Draghi to deliver some sort of comforting words that he did not deliver. German rates are leading this move, with other fixed income markets such as the periphery mirroring the movement (i.e. unchanged spread to Germany after the meeting – and tighter over the past 36 hours on the improved pace of the Greek negotiations).
According to Draghi, the Governing Council has not discussed a QE exit plan as the ECB still has a long way to go in terms of reaching its inflation target despite the latest positive surprise in inflation.
Related to this, the ECB revised its inflation forecast up to 0.3% from 0.0% in 2015 but kept the projections for 2016-17 unchanged, implying it expects inflation to increase to 1.8% in 2017. The core inflation forecast was also broadly unchanged, although the ECB revised its projection for wage growth to fall by 0.3pp in both 2015 and 2016.
Draghi was asked a number of questions about Greece but started out by refusing to comment on the creditors’ proposal sent to Greece, as the negotiations are ongoing. Draghi continued to refuse to respond on what the ECB intends to do if Greece misses a payment.
Regarding the sell-off in the fixed income markets, Draghi had clearly prepared an answer to this question and listed a number of reasons why bond yields had risen. Eventually, he concluded ‘we should get used to periods of higher market volatility’.
This clearly removed any belief the ECB may be concerned with the sell-off and was accompanied by another fierce rate increase of 10bp in 10Y Germany. The move reflects the market expecting Draghi to deliver some sort of comforting words that he did not deliver. German rates are leading this move, with other fixed income markets such as the periphery mirroring the movement (i.e. unchanged spread to Germany after the meeting – and tighter over the past 36 hours on the improved pace of the Greek negotiations).
According to Draghi, the Governing Council has not discussed a QE exit plan as the ECB still has a long way to go in terms of reaching its inflation target despite the latest positive surprise in inflation.
Related to this, the ECB revised its inflation forecast up to 0.3% from 0.0% in 2015 but kept the projections for 2016-17 unchanged, implying it expects inflation to increase to 1.8% in 2017. The core inflation forecast was also broadly unchanged, although the ECB revised its projection for wage growth to fall by 0.3pp in both 2015 and 2016.
Draghi was asked a number of questions about Greece but started out by refusing to comment on the creditors’ proposal sent to Greece, as the negotiations are ongoing. Draghi continued to refuse to respond on what the ECB intends to do if Greece misses a payment.
Recommended Content
Editors’ Picks
AUD/USD pressures as Fed officials hold firm on rate policy
The Australian Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades around 0.6419.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold price edges higher on risk-off mood hawkish Fed signals
Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.
Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’
Bitcoin price remains the focus of traders and investors ahead of the halving, which is an important event expected to kick off the next bull market. Amid conflicting forecasts from analysts, an international media site has lauded the halving and what it means for the industry.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.