Friday, April 22, 2016

Forex traders want more - euro spikes as European Central Bank stands pat

In a press conference[1] following the announcement, President Mario Draghi was forced to defend low interest rates as reporters questioned him about criticism from German officials. "It is crucial to ensure the very low inflation environment does not become entrenched", Draghi said. He said he had recently had "friendly" discussions with Schäuble and added that the German finance minister "didn't mean what he said or didn't say what he meant". Investor nerves remain tight, though, with the memory of last year's sell-off becoming more vivid as its April 29th anniversary draws closer.

"It looks like the trough in oil is now behind us", said Chris Scicluna, head of economic research at Daiwa Capital Markets. Now we concentrate on implementation...

European equity markets are trading a little lower on Thursday while USA futures are pointing to a slightly positive open, as traders look towards the ECB press conference for insight into whether the floodgates could open again in the coming months.

Draghi said the idea of helicopter money - where citizens are given a one-off cash sum to provide an immediate bolt to the economy - was "fraught with operational, legal and institutional difficulties". Initial claims for state unemployment benefits declined 6,000 to a seasonally adjusted 247,000 for the week ended April 16, the lowest reading since November 1973, the Labor Department said on Thursday. This applies to all countries in the euro zone... In addition, Chair Yellen has increased rhetoric about the risks posed by global factors to U.S. growth, particularly China, as well as delivering a clear message that she views the risks around monetary policy to be asymmetric and, as such, they have a preference for inflation to overshoot the Fed's 2% target than for growth to falter. "Just give them time". "I think we all agree on that".

The feasibility study prepared by consultants NERIN Engineering and NFC has attributed a US$615mln net value on the project, up from US$351mln.

Draghi also reiterated the need for structural reforms that included growth-friendly government policies, lower taxes, cuts to public expenditure and more investment. "Structural policies are essential, given continued high structural unemployment and low potential output growth in the euro area". Oil prices LCOc1 rose to a five-month high as the International Energy Agency said that 2016 would see the biggest drop in non-OPEC production in a generation. "But the recovery will take longer if our independence is endangered".

Draghi said that if warranted to achieve the ECB's objective, it "will act by using all the instruments available within its mandate". Draghi's comments suggested he was optimistic that measures have been effective in easing financial conditions. "The pass-through of the monetary policy stimulus to firms and households, notably through the banking system, is strengthening". Even so, Draghi also needs to offer reassurance "that the European Central Bank will continue to do whatever is needed to meet its mandate".

"In June we will conduct the first operation of our new series of targeted long-term refinancing operations, TLTRO II".

Cruz urges Pa. Republicans to unite behind him[2]
Scott Walker to capture momentum; in IN, he will likely hope for the same from Pence, whose policies closely align with Cruz's. Her opponent, Senator Bernie Sanders, has fared better with independent voters who can not participate in the primary.

References

  1. ^ press conference (www.ecb.europa.eu)
  2. ^ Cruz urges Pa. Republicans to unite behind him (thevillagessuntimes.com)

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