So far, this week has already seen two 50 basis point rate increases from major central banks (Reserve Bank of New Zealand and Bank of Canada), however, the same cannot be expected from today’s announcement from the European Central Bank. Even though inflation in the eurozone is becoming as significant of a problem compared with anywhere else in the globe, the ECB will be waiting until at least the end of Q3 2022 to begin raising interest rates above their current level of 0%.
This has left the European Central Bank lagging behind its peers concerning monetary policy and will naturally expose the euro to losses as its relative yield differential slides lower against other major currencies. The outcome for the euro today will very much be based on Madame Lagarde’s performance in the press conference. A hawkish tone could lift expectations; however, the opposite is true if she’s perceived as dovish. The announcement arrives at 12.45 and the subsequent press conference at 13.30. Watch this space…
Have a superb long weekend.
Written by Viv Savani. 6:33am, April 14th 2022
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