The FTSE is edging lower this morning but European indexes all look in good shape ahead of the ECB’s meeting later today. There is little expected on the rate front: the Eurozone’s central bank is expected to leave rates unchanged not only this month but most likely until September. However, what will attract more attention will be the bank’s comments about the growing risks to the region’s economy.

The bank’s President Mario Draghi recently said that slowing global demand was affecting the Eurozone’s growth but that the ECB’s accommodative monetary policy, which had been in place until the end of December, had helped keep domestic demand high.

Shrinking German manufacturing weighs on euro

This morning’s German PMI data was a mixed bag, showing growth in services but a manufacturing sector that is beginning to shrink, not good news for the euro. The common currency lost some ground against the dollar but barely changed against the pound as sterling remains under its own set of Brexit-related pressures. The dollar was the strongest among the main currencies this morning but even here the rise was subdued as the US government shutdown and the protracted US-China trade dispute is eroding any gains.

Venezuela and the oil price

Brent crude and WTI prices are a notch lower this morning but this may not remain the case, particularly for the US-traded WTI as OPEC-member Venezuela is currently imploding. The country’s opposition leader Juan Guaidao has declared himself interim president after an election won allegedly fraudulently by previous president leftist Nicolas Maduro.

The friction could lead to a temporary slowdown in Venezuela’s oil exports after Maduro broke off diplomatic relations with the US and gave US diplomats 72 hours to leave the country.

US refineries depend on Venezuela’s heavy crude and will have difficulty replacing it with alternatives, which would typically be Canadian and Mexican crude that is less available and higher cost.

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