Today we have a major economic event for the Eurozone. The markets are eagerly anticipating the conference today which will provide an indication of how the ECB intends to tackle the threat of deflation. In the December ECB meeting, the Euro soared as the Committee voted to leave the Quantitative Easing (QE) program unchanged. It was believed that persistently low energy prices would stabilize and that consumer activity would return to the Eurozone. However, results for consumer prices on Monday last week, showed that the Eurozone is officially in deflation. This represents the first fall since September 2015. It is widely expected that the ECB will be forced into making moves at the meeting today as concerns regarding the breadth of the ECB’s QE program rise. The market will be looking for answers regarding the tools available to the central bank as confidence in Eurozone economies is at an all-time low. The ECB was looking to take advantage of policy divergence with the U.S. However, another rate hike seems a distant prospect after disappointing results in February’s labour market report.
Investor Notes: ECB Press Conference, 1330 GMT onwards.
- Eurozone inflation contracted by 0.2% in February after a positive reading of 0.3% in January.
- As a result, the market is pricing in a 50% chance of a rise in asset repurchasing from 60 billion to 70 billion euros and a 60% probability of a deposit rate cut from (-0.3%) to (-0.4%).
- The Sentix Investor survey missed expectations falling to 5.5 points compared with a forecasted rise of 8.8 points.
- German Factory Orders contracted by 0.1% in January, representing the second month of decline.
- S. Average Hourly Earnings fell significantly, contracting by 0.1% after rising by 0.5% in the previous month.
