Market Comment | Positive mood in markets in a day full of Central Banks’ meetings

  • Financial markets benefited from the positive expectations about US-China relations as the former asked for fresh trade talks, showing a potential action to avoid further escalation of trade disputes.Moreover, many central bank meetings were held today.
  • As expected, the European Central Bank kept its monetary policy stance unchanged. The ECB left key interest rates unchanged and reiterated that it expects the key ECB interest rates to remain “at their present levels at least through the summer of 2019, and in any case for as long as necessary.” Draghi reaffirmed the ECB plans to stop the programme, reiterating that after September 2018, the monthly pace of the net asset purchases will be reduced to €15 billion until the end of December 2018, contingent upon incoming data. GDP growth has been revised slightly downwards, while the outlook for inflation remains unchanged.
  • After this uneventful meeting the EUR appreciated, approaching 1.17 USD/EUR, while the 10Y Bund yield inched up. On another front, the US 10Y Treasury yield remained flat and the USD depreciated, fuelled by weaker-than-expected inflation data.
  • The GBP appreciated – in a context of increasing uncertainties about Brexit – after the Bank of England kept its interest rate unchanged (unanimously) at 0.75% after the last meeting’s hike, as was expected .
  • Equity markets showed gains in the US and were mixed in Europe, the former favoured by slightly weaker-than-expected US inflation figures. Moreover, Chinese equity indices outperformed other Asian stock markets amid better expectations on trade talks.
  • Regarding EM central banks meetings, the Turkish Central Bank beat market expectations and raised interest rates by 625 bps from 17.75% to 24%. Consequently, the TRY appreciated strongly.Meanwhile other EM currencies appreciated today despite the drop in oil prices from levels close to $80 per barrel.

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