Daily Analysis | 26 January 2018
The ECB as expected decided to remain on hold and keep interest rates at 0.0%. In the accompanying statement, the board kept the phrasing for both the size and the length of the quantitative easing program, as well as predicted that the interest rate will remain the same well past the horizon of the net asset purchases. It was evident that in a relative question at the press conference the answer was “ Based on today’s data little chance at all that the ECB interest rates will be raised this year”. However, it also stated that it the governing council sees a sustained adjustment in the path of inflation consistent with inflation aim. Overall there was not much of a change in the statement. However in the following press conference, Mr. Draghi mentioned that data shows solid growth, momentum could lead to positive growth surprises and that the underlying inflation was subdued and inflation is to rise gradually over the medium term. It was also mentioned that they regard wages increase as a decisive factor to increase of inflation. Also, he mentioned that discussion on tapering guidance has not begun yet. On the international front, Mr. Draghi mentioned that the ECB has concerns over a possible change in US policy and that the ECB does not target rates and finger pointed at Mnuchin for the recent strong EUR/USD.
- Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)
- Resistance: 1.2495(R1), 1.2600(R2), 1.2770(R3)
BOJ releases minutes of December meeting
Overall the December meeting minutes revealed that most members shared the view momentum towards achieving price target. Most members shared also view it was appropriate for BoJ to persistently pursue powerful monetary easing. Some bank members though, said that the central bank should consider raising interest rates or slow purchases of risky assets if the economic recovery continues. Overall, the minutes revealed the BoJ dilemma that all suspected: that the quantitative and qualitative easing program in conjunction with the negative interest rates could hurt the Japanese economy if continued in the long run.
- Support: 109.30(S1), 108.60(S2), 108.03(S3)
- Resistance: 109.90(R1), 1110.45(R2), 111.22(R3)
Today’s other economic highlights:
UK: GDP for Q4 (Preliminary) Forecast:+1.4% YoY Prior:+1.7% YoY, 09:30(GMT), could weaken the GBP
Canada: CPI for December, Forecast:+1.9% YoY Prior:+2.1% YoY, 13:30(GMT), could weaken CAD
US: GDP for Q4 (Advanced), Forecast:+3.0% QoQ Prior:+3.2% QoQ, 13:30 (GMT) could weaken the USD
BOE Gov Carney Speaks, BOJ Gov Kuroda Speaks and IMF Christine Lagard speak, at WEF, 16:00(GMT) US President Trump Speaks at WEF.
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