ECB's Villeroy: Timing and size of ECB rate cuts depend on data
|European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Wednesday that the timing and the size of the ECB rate cuts will depend on data.
ECB (European Central Bank)
European Central Bank cut rates in March, remains data-dependent
LATEST ECB MEASURES TO BATTLE INFLATION
ECB’s Rehn: Can either cut or pause in April, depending on data
|European Central Bank (ECB) policymaker Olli Rehn said on Tuesday that the central bank “can either cut or pause in April, depending on data.”
ECB’s de Guindos: Trade war is bad news for the world economy, everyone loses in that situation
|European Central Bank (ECB) Vice President Luis de Guindos said on Monday, “trade war is bad news for the world economy, everyone loses in that situation.”
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March MEETING REVIEW
Breaking: European Central Bank lowers its interest rates by 25 basis points
|On Thursday, as widely expected, the European Central Bank (ECB) reduced its key rates by 25 basis points at the March policy meeting. This move puts the main refinancing operations rate at 2.65%, while the marginal lending facility and deposit facility rates now stand at 2.90% and 2.50%, respectively.
January MEETING REVIEW
Breaking: ECB lowers key rates by 25 bps in January as expected
|The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points (bps) following the January policy meeting, as expected. With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility stood at 2.9%, 3.15% and 2.75%, respectively.
December MEETING REVIEW
ECB Press Conference: Lagarde comments on outlook after cutting interest rates by 25 bps
|Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
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EUR/USD tumbles to three-week lows near 1.0750
Fresh headlines mentioning the imminence of US tariffs on the European Union put EUR/USD under heavy pressure and send it to the area of multi-week lows around 1.0750 on Wednesday.
GBP/USD retests the 1.2870 zone, or two-week lows
The Greenback's upside impulse is now gathering extra steam and motivates GBP/USD to recede to the area of new two-week troughs around 1.2870.
Gold remains slightly offered just above $3,000
Gold is trading in a narrow range on Wednesday but continues to hold firm just above the $3,000 mark. The precious metal is drawing support from upbeat sentiment in the broader commodities space, buoyed by Copper’s surge to a fresh all-time high earlier in the day.
Bitcoin holds $87,000 as markets brace for volatility ahead of April 2 tariff announcements
Bitcoin (BTC) holds above $87,000 on Wednesday after its mild recovery so far this week. A K33 Research report explains how the markets are relatively calm and shaping up for volatility as the market absorbs the tariff announcements.
Sticky UK services inflation shows signs of tax hike impact
There are tentative signs that the forthcoming rise in employer National Insurance is having an impact on service sector inflation, which came in a tad higher than expected in February. It should still fall back in the second quarter, though, keeping the Bank of England on track for three further rate cuts this year.
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Big Picture
what is the ECB?
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone. With its beginnings in Germany in 1998, the ECB’s mandate is to maintain price stability in the Eurozone, so that the Euro’s (EUR) purchasing power is not eroded by inflation. As an entity independent of individual European Union countries and institutions, the ECB targets a year-on-year increase in consumer prices of 2% over the medium term. Another of its tasks is controlling the money supply. This involves, for instance, setting interest rates throughout the Eurozone. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde has been the President of the ECB since November 1, 2019. Her speeches, statements and comments are an important source of volatility, especially for the Euro and the currencies traded against the European currency.
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who is ECB's President?
Christine Lagarde was born in 1956 in Paris, France. Lagarde, who graduated from Paris West University Nanterre La Défense, became President of the European Central Bank (ECB) on November 1, 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund (IMF) between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007-2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005-2007).
How to trade the ECB interest-rate decision
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Prior to the rate decision:
- Many traders buy the rumors and square their positions shortly after the decision is made. For instance, if the market believes that the European Central Bank (ECB) will hike interest rates, traders buy the Euro (EUR) and close the position shortly after the announcement. On the other hand, if the expectation is a rate cut, traders will short the Euro and square the position after the announcement.
After the rate decision:
- If the market’s expectations differ from the actual rate decision, there can be some excellent trading opportunities.
- If the market expects a rate hike but the European Central Bank ends up cutting rates, a short-term (1-2 hours) selling the Euro could be successful.
- If the market expects a rate cut but the ECB raises rates, a short-term long position on the Euro (1-2 hours) may be advantageous.
More generally, relatively high interest rates will usually result in a stronger Euro and vice versa.
Hike, cut or keep interest rates unchanged
The European Central Bank’s (ECB) decision on interest rates always has an effect on the Euro (EUR).
When interest rates increase, the European Central Bank is selling government securities to large financial firms. In turn, the financial organizations are paying in euros for these securities. This effectively decreases the amount of currency circulating in the economy. A decreasing supply leads to higher demand and therefore causes the value of the Euro to appreciate.
When the interest rates decrease, the European Central Bank floods the market with euros. This is done by purchasing government securities from financial organizations. In return for the securities, these banks and financial deals are paid in euros, therefore increasing the supply of euros in the economy. As supply increases, the value of the Euro depreciates.
the world interest rates table
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
some concepts you need to know
In practical terms, QE means that central banks create money out of nothing to buy securities, such as government bonds. This new money swells the size of bank reserves by the quantity of assets purchased and that’s why this programme is called Quantitative Easings. The money supply is intended to flood financial institutions with capital in an effort to stimulate lending and increase liquidity.
Much of the governments’ debt is held by banks in the Eurozone and the ECB wants them to give more credits. If the European Central Bank buys government bonds, their prices rise and profitability drop even more. This is a liquidity-providing operation that weakens the value of the euro. This depreciation makes European exports cheaper and competitive, and ultimately, helps in recovering. In addition, as a result of the stimulus to internal and external consumption, the ECB combats the risk of deflation, a widespread and prolonged drop in prices, as well as the high unemployment.
The long term refinancing operation (LTRO) is a cheap loan scheme for European banks that was announced by the European Central Bank towards the end of 2011 in a bid to help ease the eurozone crisis.
Round one was carried out on 21 December, when banks took €489 billion from the European Central Bank. The loans are due to be repaid within three years at a rate of 1%, and a second round will be launched on 28 February, with the results of how much money was requested due on 29 February.
As the eurozone crisis has escalated, banks have become less stable and have less money to lend. The objective of the LTRO is to boost cash flow in the market and avoid a severe credit crunch or collapse of the banking system.