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PM Bulletin: Gold
29 Jan 2016
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29 Jan 2016
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28 Jan 2016
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28 Jan 2016
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27 Jan 2016
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27 Jan 2016
PM Bulletin: Tomorrow’s FOMC meeting
26 Jan 2016
AM Bulletin: Equities slide on crude sell-off
26 Jan 2016
PM Bulletin: Silver chart
25 Jan 2016
Weekly Bulletin: Promise of further stimulus halts equity slide
25 Jan 2016
PM Bulletin: EURUSD chart
22 Jan 2016
AM Bulletin: Equities rally on ECB and oil
22 Jan 2016
PM Bulletin: Dovish Draghi triggers euro sell-off
21 Jan 2016
AM Bulletin: ECB meeting in focus
21 Jan 2016
PM Bulletin: Crude makes fresh multi-year lows
20 Jan 2016
AM Bulletin: Stocks slide as oil slumps
20 Jan 2016
PM Bulletin: Bank of Canada rate decision
19 Jan 2016
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19 Jan 2016
PM Bulletin: Crude oil - long-term charts
18 Jan 2016
Weekly Bulletin: China and oil weigh on equities
18 Jan 2016
PM Bulletin: Long-term gold bullion chart
15 Jan 2016
AM Bulletin: More woe from China
15 Jan 2016
Holiday Schedule: Martin Luther King Day Monday 18th January 2016
14 Jan 2016
PM Bulletin: Equities: bull or bear?
14 Jan 2016
AM Bulletin: Investors remain jittery
14 Jan 2016
PM Bulletin: The Bank’s rate decision
13 Jan 2016
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13 Jan 2016
PM Bulletin: Saudi Aramco’s IPO
12 Jan 2016
AM Bulletin: Crude closes in on $30
12 Jan 2016
PM Bulletin: US Fourth Quarter Earnings Season
11 Jan 2016
Weekly Bulletin: 2016: Trouble ahead?
11 Jan 2016
January: Non Farm Payrolls Out Today
08 Jan 2016
PM Bulletin: Another blow-out payroll number
08 Jan 2016
AM Bulletin: China effect calms markets
08 Jan 2016
PM Bulletin: Non-Farm Payroll look-ahead
07 Jan 2016
AM Bulletin: Equities slump after 2nd China trading halt
07 Jan 2016
AM Bulletin: Investors remain jittery
06 Jan 2016
AM Bulletin: China steadies and Europe rallies
05 Jan 2016
AM Bulletin: Chinese equities plunge
04 Jan 2016
 
 
 

 

The European Central Bank (ECB) kept all its key interest rates unchanged today. This was expected and means that the headline Minimum Bid Rate has now been stuck at 0.05% since September 2014. Meanwhile, the Deposit Rate remains at minus 0.3%. At its last meeting in early December the ECB cut this by 10 basis points from minus 0.2%. As a recap, the Deposit Rate is what the ECB charges banks for lodging excess reserves with them. It has been negative since June 2014. This means that the ECB charges banks for money left on deposit, and it does this to encourage banks to make loans outside of the central banking system.  So far, so dull.

All eyes then turned to today’s main event: the ECB statement and Mario Draghi’s press conference. The biggest question for investors was how was the central bank going to address the ongoing sell-off in oil? After all, cheaper energy may be good for you and me but it’s terrible for inflation data. It’s well known that one of the greatest fears for the ECB is deflation as this weighs on over-indebted corporations and governments. In addition, investors were intrigued to hear if the ECB had any view on the sell-off in equity markets.

The key takeaways from the Mr Draghi’s press conference were that the downside risks have increased since the beginning of the year, both market and geopolitical; interest rates should stay at (or below) current levels for some time; the inflation outlook is considerably lower than it was at the ECB’s last meeting in early December, and, most significantly, the ECB must review and perhaps reconsider its stance on monetary policy when in next meets in March.

Investors interpreted this to mean that the ECB is willing to provide additional monetary stimulus. Consequently they sold the euro and precious metals, while piling back into equities and the dollar. Of course, it is worth remembering that the ECB had already left the door open for further easing. Back in December the ECB extended its bond buying programme by six months but held off from increasing the size of monthly bond purchases. Some analysts had been expecting an increase of €10-20 billion per month which could have boosted the overall amount of quantitative easing from just over €1 trillion to as much as €1.74 trillion. So by under-delivering then, the ECB had kept its powder dry. Mr Draghi said as much soon after when he said that the bank’s quantitative easing programme was effectively unlimited. This had echoes of Mr Draghi’s promise in July 2012 to “do whatever it takes” to save the euro and led to a sharp rally in equities.

But this time round it’s going to take a lot more than a promise to calm nerves. So far this year every attempt to push equities higher has been treated as a selling opportunity. 


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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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