Mario Draghi In Highlight's

June 14 – Economic Events Outlook – Spotlight on ECB Presser, What to Expect?

Posted Thursday, June 14, 2018 by
Arslan Butt • 3 min read

The Fed Chairperson Powell and his fellow policymakers moved the interest rate from 1.75% to 2% and the market moved in line exactly as we had forecast in our June 13 – Economic Events Outlook – Fed’s 2% Rate, What Else to Expect? The U.S dollar turned bearish after an initial spike, gold soared after an initial dip and the rate hike also burdened the global stock markets.

Today, all eyes and ears remain on the ECB Presser and the investors are aiming for a hawkish tone from Mario Draghi, especially after a hawkish FOMC on Wednesday. Here’s what to look for in ECB’s press conference today..

Watchlist – Top Economic Events to Watch Today

For the second day in a row, the markets remain extremely volatile due to ECB press conference as well as on the release Retail Sales m/m from the United Kingdom and the United States.

1) Great Britain Pound – GBP

Retail Sales m/m – The Office for National Statistics is due to release the retail sales data at 8:30 (GMT). It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. In May, the retail sales jumped by 1.6% vs. the forecast of -1.1%, whereas the sales seem to slow down to 0.5% in June.

2) U.S. Dollar – USD

Retail Sales m/m – The Census Bureau is due to release the retail sales data at 12:30 (GMT).In May, the U.S. retail sales slipped to 0.3% from 0.8% and exerted a selling pressure on the dollar.

This month, economists are expecting a 0.4% rise in retail sales and 0.5% rise in core retail sales. A higher number of sales indicate a higher inflation and growing economy. So, the positive data will be good for the greenback.

3)  Eurozone – EUR

ECB Monetary Policy Meeting

Main Refinancing Rate – At 11:45 (GMT), the European Central Bank will be releasing its refinancing rate (interest rate) which is widely expected to remain unchanged at 0.00%. Out of curiosity, an initial rate hike is projected for mid-2019. So, what’s there for us today? It’s Mario Draghi and his press conference.

ECB Press Conference – Although the ECB is widely expected to stand pat this month, investors speculate it may offer hints on its plans to start tapering its bond purchases this year. While many reckon the ECB’s policymakers may avoid signaling shifts in ECB’s policy given Italy’s political situation and a series of disappointing data in the Eurozone.

The real question is, what’s their plan for unwinding stimulus program?

Any remarks on tapering the QE (Quantitative program) and the next rate hike (which is expected next year in 2019) will help us drive further trends in the Euro. Until then the Euro is likely to remain supported over weakness in the dollar as well as the hawkish policy sentiments from the ECB.

Potential Impacts:

1) What happens if ECB decides to keep the rate unchanged? Euro can take a dip as an initial response, but that’s not going to be huge.

2) What if ECB fails to speak about tapering bond buying? We already know the rate is not going to change, but the investors are anxiously waiting to hear about any timeline for lowering or unwinding the 2.55-trillion-euro bond-purchase program. Therefore, failure to speak about this can lead to massive sell-off in the Euro today.

3) What if ECB gives a timeline & shares a plan of unwinding APA (Asset purchase agreement)? It’s going to offer us an opportunity to buy Euro for a great number of pips. The estimated figure is 100 or more pips on the buying side.


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