Easier monetary policy is now the base case for the European Central Bank according to analysts at RBC Capital Markets- They think the central bank will lower its deposit rate further into negative territory over the second half of this year.

Key Quotes: 

“Recent data suggests the euro area’s pickup in growth early this year was short-lived. A slowdown in the manufacturing sector is becoming entrenched, particularly in Germany. Industrial production likely returned to drag on growth in Q2, and recent PMI data show little momentum heading into Q3. Retail sales have also softened in recent months, though data for the broader services sector has been more positive. Services PMIs ticked higher in all major euro area economies in June, with the overall index hitting a year-to-date high.”

“Easing in political uncertainty and less unrest in France and Italy has likely helped in that regard. But despite signs of domestic resilience, growing external headwinds are likely to keep the euro area from growing at an above-trend rate. We have lowered our 2019 GDP forecast for the currency bloc to 1.1%, which would be the slowest in six years.”

“A subdued growth outlook, along with persistently low inflation and declining inflation expectations, has the ECB contemplating further easing. In particular, President Draghi noted that more stimulus should be expected unless economic conditions improve (he previously said conditions would need to deteriorate to warrant further action).”

“We now expect the ECB will lower its deposit rate from -0.4% to -0.6% over the second half of this year via 10 basis point rate cuts in September and December. It is also likely to signal that further QE is on the table, though we don’t think asset purchases will restart in the near-term.”
 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: Trapped in a bull flag on 4H chart

EUR/USD's pullback from Oct.21's high of 1.1179 to 1.1106 has taken the shape of a bull flag on the 4-hour chart. A bull flag represents a pause which usually refreshes higher. A breakout would open the doors for 1.1320. A 4-hour close above 1.1134 would confirm a flag breakout.

EUR/USD News

GBP/USD: Modestly changed to 1.2915 amid fears of UK election

Despite mounting speculations of a general election in the UK, GBP/USD clings to 1.2915 during early Thursday morning in Asia. No major British data highlights the US economic calendar, trade/Brexit news as the key catalysts.

GBP/USD News

USD/JPY declines to 108.60 amid fresh risk aversion, all eyes on the ECB

With the recent uncertainty surrounding the UK’s politics crossing wires, USD/JPY steps back from the previous rise to 108.60 as Tokyo opens for Thursday’s trading session.

USD/JPY News

Gold drops to $1,491 despite downbeat catalysts from Asia, Brexit uncertainty

Despite economic challenges from Asia and uncertainty surrounding the Brexit, Gold prices step back to $1,491 amid Asian session on Thursday. An active economic calendar, including ECB, will be the key.

Gold News

ECB Preview: Draghi's defense of his legacy may drag EUR/USD down

"The ECB is ready to do whatever it takes to preserve the euro." These famous words by Mario Draghi, President of the European Central Bank, are the centerpiece of his legacy.

Read more

Forex MAJORS

Cryptocurrencies

Signatures