ECB meeting pivotal for single currency’s short-term prospects

The Governing Council of the European Central Bank will meet later this morning, under growing pressure, to provide stimulus to a Eurozone economy which is in danger of slipping into a long, if shallow, recession.

It is certain that the ECB will slash its growth forecast for this year and most likely next. It will confirm the long-held view that Mario Draghi, the outgoing President will leave his post in November never having presided over an economy which was growing sufficiently to warrant a hike in short term interest rates. This is despite many false-dawns over a tenure which started during the financial crisis.

Draghi will be left with his familiar role of trying to improve sentiment although he will have very little material to work with. This will end yet another false-dawn for the Eurozone economy which since its inception twenty years ago has lurched from crisis to crisis. It was only six months ago that the ECB was sufficiently comfortable to predict an end to quantitative easing and was ready to herald a new era of steady growth.

Several factors have coincided to halt growth in its tracks: the trade war and growing tension between the U.S. and China and Brexit have been the main hurdles, as well as internal political issues in many individual nations.

Yesterday, the euro traded between 1.1285 and 1.1325, closing barely changed at 1.1309.

Considering your next transfer? Log in to compare live quotes today.

BoE to mimic the Fed

Amongst the debris of Brexit and the major Parliamentary votes still to come the Bank of England is still trying to manage an economy which, along with other important policy issues, has been neglected as the UK tries to navigate its way out of the EU.

There have been a plethora of speakers from the Monetary Policy Committee over the past few days each of whom have shown a unity of purpose which mirrors the sentiment of the Federal Reserve in the U.S.

Michel Saunders was the latest to speak today and he echoed his colleague’s words in commenting that while Brexit is a major consideration due to the continued uncertainty it creates and while inflation remains fairly well under control, combined with moderate growth, the MPC can afford to be patient.

The major dilemma facing the Central Bank is if Sterling were to “fall off a cliff”, which remains a possibility, following the end of Brexit negotiations. Were Sterling to see an adverse reaction, then inflation may rise quickly. With wage inflation unlikely to rise much more, consumer confidence would also be damaged as the price versus wages gap could narrow quickly.

Brexit negotiations apparently continue with EU negotiator Michel Barnier making cooperative noises while in practice changing nothing of the Withdrawal Agreement. This is likely to continue to be the pattern until March 12th which is the latest date for a meaningful vote on Final Agreement.

Sterling stayed in a narrow range yesterday, between 1.3180 and 1.3124, closing pretty much unchanged at 1.3172.

U.S. trade data a blow to Trump plans