|

ECB Preview: All quiet on the monetary policy front until 2019

  • After the ECB Governing Council prolonged the asset purchasing until the end of 2018, the forward guidance on rates is set to fall asleep until Christmas.
  • The macro picture remained broadly unchanged since June, so policymakers might want to enjoy summertime nap in a shade.
  • The leaks of debate on the timing of the rate hikes reveal the argument of when is the next summer, in June meeting away from Frankfurt or in July in headquarters.

The European Central Bank is pretty much done for this year and nothing really exceptional is set to be expected from the Frankfurt-based lender until the economic fundamental change. The  ECB June meeting minutes disclosed that the ECB President Mario Draghi is holding on tight to his leadership position unifying the controversial voices from within.

The ECB policymakers showed unanimous support of the monetary policy proposals and even if it is highly unlikely that someone like the Bundesbank President Jens Weidmann would be fully in favor of everything the ECB minutes showed, the majority waived in favor and that is what Mario Draghi fully controls. No information leaks, no signs of dissent, unity under one command is the face of the ECB now.

That refers to the only important measure taken in June, the prolongation of the asset purchasing program duration until December 2018. Since June, there were some voices from within the ECB Governing Council hinting at what is the best time to expect the next rate hike, but some controversy was stemming from what means summer for the Banque de France Governor Villerois and what it means for the others and that is what markets might want to claim from Draghi at the press conference in July.

So the July ECB meeting should be pretty much boring, as there is not much to decide upon. Duration of the asset purchasing program had been already decided upon in June and the data dependency of the ECB repeatedly communicated since the beginning of this year means that there will not be much to talk about. 

Therefore I also expect a fairly muted FX market reaction to this month’s ECB meeting press conference. Even with President Mario Draghi clarifying what precisely the summer of 2019 means, the FX market is unlikely to get overly excited in favor of Euro or entirely against it.

Recommended story

ECB Minutes show Dovish Draghi is in full control - 3 takes
 

Author

Mario Blascak, PhD

Mario Blascak, PhD

Independent Analyst

Dr. Mário Blaščák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

More from Mario Blascak, PhD
Share:

Editor's Picks

GBP/USD drops below 1.3550 on geopolitical tensions, hawkish Fed bets

GBP/USD trades with mild losses below 1.3550 in the second half of the day on Tuesday. The US Dollar recovers some ground amid ongoing Middle East tensions and hawkish expectations around the Fed's interest rate outlook, weighing on the pair ahead of US data releases.

EUR/USD stays below 1.1600 ahead of US data

EUR/USD struggles to capitalize on the overnight bounce and trades below 1.1600 on Tuesday. The data from the Eurozone showed that the annual HICP inflation rose to 3.3% in August from 2.9% in July, matching the market expectation, while the core HICP inflation edged lower to 2.4% from 2.5% in this period. In the second half of the day, JOLTS Job Openings and ISM Manufacturing PMI data will be featured in the US economic calendar.

Gold extends reversal below $4,400 on hawkish Fed repricing

XAU/USD extends its reversal below $4,400, posting a nearly 7% decline from last week's highs. Precious metals struggle this week as markets reprice a Fed rate hike in September.

Crypto Today: Bitcoin, Ethereum, XRP struggle to extend gains despite ETF inflows

Bitcoin stalls while holding above $78,000 support as ETF inflows return. Ethereum takes a breather around $2,450 amid sustained institutional support. XRP remains pressured as the 200-day EMA provides immediate support.

US JOLTS Job Openings set to show a steady labor market

The US Bureau of Labor Statistics has a busy week, releasing relevant employment data. It will start on Tuesday with the publication of the July Job Openings and Labor Turnover Survey (JOLTS) at 14:00 GMT. The JOLTS report is expected to show job openings stood at 7.3 million in July.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.