ECB Interest Rate Decision Awaited
The European Central Bank (ECB) is due to announce its monetary policy decision in a few hours, amid growing expectations that the central bank President will push bank deposit rates further into negative territory. The ECB is expected to expand the asset purchase programme to encourage lending, boost inflation and spur growth in the Euro zone. Today’s outcome of the ECB policy meeting is crucial, given the disappointing stimulus package that was delivered in December and as markets are underpinned of late by hopes that the central banks are taking efforts to bolster a fragile global economy.
On the data space, earlier today a survey report indicated that UK house prices continued to rise in February. Across the Atlantic, a weekly update on new jobless claims is due for release later today.
Pound Sterling – UK Markets
Today, the Pound is trading higher against the common currency as market participants get ready for the upcoming ECB monetary policy meeting in the Euro region. Data-wise in the UK, the Royal Institution of Chartered Surveyors (RICS) reported that UK house prices maintained the same narrow range of growth for the fifth consecutive month in February. Property prices in recent months have been on the higher side ahead of the stamp duty surcharge which will come into effect in April. Meanwhile, the RICS’s index, for property price increases over the next three months, tumbled in February. The UK calendar for the rest of the day is data empty.
In yesterday’s session, robust UK manufacturing production figures had slightly boosted the appeal of Sterling against its key peers. Also, the National Institute of Economic and Social Research estimated that economic growth for the UK slowed in the three months leading to February. But the think-tank stated that a particularly weak December had weighed on the three-month growth rates. Hence it appears that output growth for the first quarter of 2016 might slightly strengthen.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Euro this morning ahead of the much anticipated ECB monetary policy meeting today. At the same time, in the US, greenback investors will keep an eye on the weekly update of the number of individuals who applied for first-time unemployment benefits in the US last week. Expectations are for the new jobless claims filings to restate the previous week’s upbeat assessment on payrolls for February. A reading below 300.00 K will signal persistent strength in the US labour market. Meanwhile, an unexpected surge in initial jobless claims might indicate that the US jobs market is heading for a slowdown. The US Federal Reserve has time and again highlighted the significance of the health of the labour market to its interest rate decisions. As a result, officials will likely focus on today’s data to gauge the state of the job sector as they get ready for the policy meet scheduled next week.
In addition to weekly jobs data, the US government’s report of its receipts and outlays for February is also due for publication in the session ahead.
Euro – European Markets
The Euro has drifted lower against its key currency counterparts this morning as markets brace for the outcome from the ECB’s monetary policy meeting today. The ECB is likely to unveil its second stimulus package in three months today, amid growing concerns that low oil prices have impacted wages and prices, pushing inflation back into negative territory last month. Expectations are rife that the central bank Governor, Mario Draghi, will announce a further deposit rate cut and might also step up its asset buying programme to boost inflation and growth in the Euro zone. The ECB in December had disappointed markets by delivering a smaller monetary stimulus package. As a result, investors will keenly monitor whether the Governing Council opts for a package of modest measures yet again in today’s meeting.
On the macroeconomic data front, German trade surplus contracted more than expected in January as exports unexpectedly dropped signalling weak foreign demand from China and other emerging markets. Today’s data indicates that a net foreign trade is likely to weigh on the German economic growth in 2016.
Other Currencies – Highlights
The New Zealand Dollar – US Dollar currency pair is currently trading just below the 0.67 mark, having recovered from yesterday’s sharp losses seen after the Reserve Bank of New Zealand’s (RBNZ) surprise rate cut. The central bank lowered its official cash rate by 25 basis points to a record low of 2.25%, as it warned about the recent weakening of global economic growth prospects, the strength of the Kiwi Dollar and the fall in domestic inflation expectations. The RBNZ also noted weakness in its important dairy sector and pressures in the housing market. In addition, the RBNZ Governor, Graeme Wheeler, notified that a further deterioration of these conditions would be enough to call another rate cut at the next meeting in late April.
Moving ahead, New Zealand will release the Business NZ Manufacturing PMI and food prices data, later in the day, which will bring in fresh evidence about the health of the economy in 2016.