IronFX Daily Commentary by Sakis Paraskevov | 21/01/2016
January 21, 2016 9:37 am
Main points for Today
ECB meeting preview: Are the latest measures “adequate”? • At their December meeting, the Governing Council cut the deposit facility rate further into the negative territory and extended the QE program for at least another 6 months. • With the latest stimulus package just above a month old, we don’t expect any change in policy at this meeting. Instead, we believe the Bank will remain on hold in order to assess whether the risks to growth and inflation have risen, following the renewed fall in oil prices. • After having raised expectation too high going into the December meeting, ECB Draghi may also be cautious in his choice of language. He could simply stress the Bank’s readiness to act again and keep the door open to use all the tools available within its mandate. • The market is already pricing in some further easing this year, despite Draghi describing the latest measures as “adequate”. A change to that language is needed to signal additional measures, and weaken the common currency.
Bank of Canada holds rates unchanged • BoC officials were leaning towards a rate cut but in the end, they decided to remain on hold. • One of the main reasons they kept rates unchanged was the expectations of new fiscal stimulus and the weak CAD. • BoC Gov. Poloz will wait to see Canada’s federal budget before taking further action this year. If the magnitude of the anticipated fiscal policy disappoints, then we could see further monetary easing. This may keep CAD under pressure.
Today: • Eurozone: The preliminary consumer confidence for January is forecast to have declined at the same pace as the previous month. Usually not a major market mover. • US: Initial jobless claims for the week ended on the 15th of January are forecast to have decreased from the previous week, while the 4-week moving average is expected to have increased slightly. The Philadelphia Fed Business activity index is expected to show that business conditions continued to deteriorate in January, but by less than the previous month. • Speakers: ECB President Mario Draghi will hold a press conference following the interest rate decision.
Main points for Today
ECB meeting preview: Are the latest measures “adequate”?
• At their December meeting, the Governing Council cut the deposit facility rate further into the negative territory and extended the QE program for at least another 6 months.
• With the latest stimulus package just above a month old, we don’t expect any change in policy at this meeting. Instead, we believe the Bank will remain on hold in order to assess whether the risks to growth and inflation have risen, following the renewed fall in oil prices.
• After having raised expectation too high going into the December meeting, ECB Draghi may also be cautious in his choice of language. He could simply stress the Bank’s readiness to act again and keep the door open to use all the tools available within its mandate.
• The market is already pricing in some further easing this year, despite Draghi describing the latest measures as “adequate”. A change to that language is needed to signal additional measures, and weaken the common currency.
Bank of Canada holds rates unchanged
• BoC officials were leaning towards a rate cut but in the end, they decided to remain on hold.
• One of the main reasons they kept rates unchanged was the expectations of new fiscal stimulus and the weak CAD.
• BoC Gov. Poloz will wait to see Canada’s federal budget before taking further action this year. If the magnitude of the anticipated fiscal policy disappoints, then we could see further monetary easing. This may keep CAD under pressure.
Today:
• Eurozone: The preliminary consumer confidence for January is forecast to have declined at the same pace as the previous month. Usually not a major market mover.
• US: Initial jobless claims for the week ended on the 15th of January are forecast to have decreased from the previous week, while the 4-week moving average is expected to have increased slightly. The Philadelphia Fed Business activity index is expected to show that business conditions continued to deteriorate in January, but by less than the previous month.
• Speakers: ECB President Mario Draghi will hold a press conference following the interest rate decision.
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