KBC Market Research Desk
KBC Bank
Headlines
CE markets are awaiting the ECB meeting
Polish industry surprises positively in December
While regional government bonds like core bond markets have been facing sell-off ahead of today’s ECB meeting, CE currencies have been mixed. While the Czech koruna firms a bit and the forint stays unchanged, the zloty actually firmed following a release of December’s industrial figures.
Recalls that compared to previous two months the Polish industrial production grew by robust 8.4% y/y, so the growth of industrial production reached 3.3% in 2014. That’s positive news for the zloty, however on the other hand producer produce price continued to fall deeply (minus 2.2 y/y), so overall yesterday’s Polish data were a mixed bag for the NBP.
Nevertheless, all regional markets have been waiting for today’s key ECB meeting. The ECB is about to take an historical step by announcing a sovereign debt QE-programme to add to their arsenal of easing programmes. This is widely expected, but the details will determine the effectiveness and credibility of the programme and of the ECB’s commitment to reach its inflation mandate. Regarding size, the WSJ/Bloomberg floated (based on “ECB officials”) yesterday monthly purchases of €50B/month for at least 10 months and maximum 22 months. The WSJ scenario (€500B) is the absolute lower threshold of market expectations, the latter scenario is rather bullish. We think investors could take profit on the European bond rally. It could sound somewhat strange but given the extreme market positioning (long bonds), a disappointing outcome could force investors to take some, short term, chips off the table as well. This scenario might apply to CE bond markets too, while for regional currencies the conclusion might be rather mixed.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
Recommended Content
Editors’ Picks
EUR/USD eases to near 1.0700 ahead of German inflation data
EUR/USD is paring gains to near 1.0700 in the European session on Monday. The pair stays supported by a softer US Dollar, courtesy of the USD/JPY sell-off and a risk-friendly market environment. Germany's inflation data is next in focus.
USD/JPY recovers after testing 154.50 on likely Japanese intervention
USD/JPY is recovering ground after sliding to 154.50 on what seemed like a Japanese FX intervention. The Yen tumbled in early trades amid news that Japan's PM lost 3 key seats in the by-election. Focus shifts to the US employment data and the Fed decision later this week.
Gold price bulls move to the sidelines as focus shifts to the crucial FOMC policy meeting
Gold price struggles to capitalize on its modest gains registered over the past two trading days and edges lower on the first day of a new week, albeit the downside remains cushioned.
Ripple CTO shares take on ETHgate controversy, XRP holders await SEC opposition brief filing
Ripple loses all gains from the past seven days, trading at $0.50 early on Monday. XRP holders have their eyes peeled for the Securities and Exchange Commission filing of opposition brief to Ripple’s motion to strike expert testimony.
Week ahead: FOMC and jobs data in sight
May kicks off with the Federal Open Market Committee meeting and will be one to watch, scheduled to make the airwaves on Wednesday. It’s pretty much a sealed deal for a no-change decision at this week’s meeting.