Elephant in the Room:
The European Central Bank published its latest monetary policy decision today, with the European monetary authority leaving interest rates unchanged. The Bank held the main refinancing rate at 0% with the deposit rate, the reward for holding funds at the bank overnight, at -0.40. The ultra-accommodative monetary policy stance is nothing new, with markets understanding the intentions of arch-dove President Draghi for a long time. Guidance was held to leave markets anticipating the first interest rate hike, the first of Draghi’s 8-year presidency, after the summer of 2019. The Euro gained significant value, following a shaky morning session, throughout the early afternoon despite the continued dovish tilt to monetary policy simply because the Bank did not place weight on the risk that Italy brings to the single currency and Union growth forecasts. Despite numerous press conference questions enticing Draghi to condemn Italy’s budget plan, the President held firm suggesting that the spending plan was a matter of fiscal governance and of little to no consequence to the broad-based growth and monetary progress within the Eurozone. With a lack of positive Brexit news today, the Pound continued to stall, succumbing to the pressure of the US Dollar as cable began to test 1.28. Following an appalling day for the Rand yesterday, South Africa’s currency retraced slightly to close around one quarter of one percent stronger on the day on a trade weighted basis.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Morning Brief – US Interest Rates
Humphrey Percy
Mon 25 Sep 2023
US Interest Rates Nothing much new over the weekend other than while sifting thought the tea leaves from last week, we found that not one but two members of the FOMC, the rate setting and policy making committee of the Federal Reserve, advocated US interest rates staying higher for longer to crush inflation. Within their […]
Morning Brief – GBP
Humphrey Percy
Fri 22 Sep 2023
GBP While the Bank of England’s decision to pause on raising rates by the narrowest of margins with voting 5-4, that resulted in GBP being sold sharply which reflects the market’s view that while inflation at 6.7% looked better than expected yesterday, the effect of higher oil prices and petrol and diesel at the pumps […]
Morning Brief – A revised 2024
Charles Porter
Thu 21 Sep 2023
A revised 2024 The Dollar opens stronger this morning following the Federal Reserve’s decision last night. The decision confirmed interest rates were to stay on hold following this meeting. As we have highlighted following previous decisions, the forward guidance offered by the Chair Jay Powell was once again underwhelming. However, the Dollar’s bid this morning […]
