ECB meeting: No significant impact anticipated

Market movers today

• Focus will be on the ECB meeting, although it is expected to be much less interesting than the latest meeting in January when the ECB announced its QE programme. Attention will be on further details about the programme and the publication of the Legal Act, which should follow this week before the purchases are expected to start on Monday 9 March. We believe the release should not have a major market impact, as the details announced in January were much clearer than we are used to when the ECB launches new measures, see ECB preview, 27 February 2015.

• Bank of England should remain on hold at its meeting today. We still call for a hike in August as the economy continues to recover. Most importantly, the unemployment rate is approaching the medium-term equilibrium, wages are increasing and the historically low headline inflation is due mainly to the fall in commodity prices.

• In terms of data release focus will be on German factory orders, which are expected to decline after a very strong reading in December.

Selected market news

This morning Chinese stock markets are trading down around 1% after China’s official growth target for 2015 was lowered to 7% - the lowest in 11 years. Even though the new growth target seems to be weighing a bit on the Chinese markets, it is hardly a surprise the Chinese growth has been disappointing for some time and the market consensus is already fairly bearish on Chinese growth. In the rest of Asia stock markets are also slightly down following the trend from yesterday’s US session, where the major US stock market indices fell moderately.

Yesterday, we got the important ADP report for the US labour market. The report showed that US private sector employment grew less than expected (212k versus an expectation of 220k) in January. The ADP numbers might – or might not – give an indication on what to expect from the ‘real’ US labour market report, which will be published on Friday.

In the currency markets the EUR continues to weaken ahead of today’s ECB policy announcement. This morning EUR/USD is trading well below 111. We expect the EUR to continue to weaken, as the ECB’s QE programme gets under way.

On Wednesday the Brazilian central bank once again hiked its key policy rate to curb inflationary pressures on the back of a weakening currency. Despite the rate hike the Brazilian real remains under pressure and the currency weakened more than 2%. The Brazilian central bank is stuck between a rock and a hard place as monetary tightening is pushing the economy closer to recession, while inflation has been heading higher.