ECB to Roll Back Stimulus

25th September 2018 Market Update

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?? GBP - There was no data of note from the UK yesterday. Despite this Sterling recovered against the majors as the panic which was adopted by the market on Friday appeared to subside after the weekend.

Today there is no data of significance from the UK, with the only event of note being MPC member Vlieghe speaking at Imperial College Business School this afternoon.

?? EUR - Mario Draghi testifying to the European Parliament's Economic and Monetary Affairs Committee yesterday afternoon was the most significant piece of financial news yesterday. He stated that he was confident that the Eurozone will consistently hit its inflation targets in the years ahead due to the strong labour market. As a result, Mario Draghi intends to roll back monetary stimulus by the end of the year. There is nothing of relevance being released from the Eurozone today.

?? USD - Like the UK, there was no relevant data yesterday released from the US. Today the only thing of note is consumer confidence, which is expected to drop slightly from last month’s reading. Tomorrow the US is widely expected to increase interest rates to 2.25%, and the market appears to have priced this in. The press conference that follows and forward guidance provided is going to be the most likely cause of market volatility, unless the Fed does not increase interest rates.

 

Summary: 
Sterling bounced back slightly yesterday against the majors, following the hit it took Friday as Prime Minister May made her defiant Brexit speech. This was due to the market adopting a calmer approach yesterday following the previous turbulence. This recovery may not continue as murmurs of a November election remain.
 
Mario Draghi testified to the European Parliament's Economic and Monetary Affairs Committee yesterday afternoon. The Euro strengthened in response as Draghi stated the ECB was still on track to reduce some of the monetary stimulus policies before the end of the year. This is because he is confident that the Eurozone will consistently hit its inflation target in the years ahead.
 
Today is another quiet day, with the only events of note being MPC member Vlieghe speaking at Imperial College Business School and US consumer confidence being released this afternoon.

 

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