Not enough consensus in the ECB to change the monetary policy

Fundamental Analysis

EUR

"There's enough from today to suggest that we might see a material change in policy in June. But no one should get ahead of themselves. There's clearly not enough consensus on the Governing Council."

- James Athey, EUR Aberdeen Asset Management

As markets expected, the European Central Bank left its monetary policy unchanged at its meeting on Thursday as inflation remained below its 2% target. Although, the ECB acknowledged strong economic growth, with the economy showing the best growth rate since the global financial crisis. Nevertheless, the Central bank said that further rate cuts and an increase in asset purchases remained on the table despite Germany's calls for a stimulus reduction. The ECB President Mario Draghi stated that last month's data confirmed the view that the economy was in a good shape and downside risks continued to fall over the past several months. However, Draghi noted that underlying inflation growth remained subdued, driven by temporary factors, such as the change in crude oil prices. Therefore, policymakers voted to keep the Bank's main refinancing rate at 0.00%, the deposit rate at -0.4% and the pace of monthly asset purchases at 60B euros. Nevertheless, some analysts assumed that if Emmanuel Macron wins the final round of the French Presidential Election and the Euro zone's economy maintains a moderate yet stable pace of growth the ECB would likely reduce some of its stimulus at its next meeting in June. Furthermore, Draghi highlighted that deflation risks the risks of deflation "largely disappeared''.

USD

"Business investment appears to have some better momentum early in 2017 and, while growth is far from hot, we appear to be transitioning away from the declines that plagued much of 2016."

- Robert Kavcic, BMO Capital Markets

Orders for US-manufactured goods rose less than experts estimated in March, official figures revealed on Thursday. The US Department of Commerce reported that orders for durable goods in March soared only 0.7%, following the previous month's increase of 1.8%. Excluding transportation items, orders for core durable goods plunged 0.2%, while analysts anticipated 0.4% growth. This negative figure represented the first decline since June 2016. The main cause of March's drop was associated with weaker demand for automobiles, fabricated metal products and machinery. Namely, the number of orders for motor vehicles tumbled 0.8%, the slowest rate of growth in the last 25 months. At the same time, orders for fabricated metal products slipped 0.8%, whereas machinery orders fell 0.2%. In contrast, bookings in the civil aircraft sector jumped 7%. Furthermore, the number of orders for defence equipment advanced 12%. According to analysts, the slowdown at the end of the Q1 was mainly driven by the strong US Dollar, struggles in the energy sector and the weather-related factors. Nevertheless, they believe that businesses are going to increase their capital expenditures in the near future amid the US President Donald Trump's announced tax reform.

Download The Full Daily Forex Fundamental Overview