On Friday, euro came under pressure as European Central Bank (ECB) President Mario Draghi reiterated to the markets that the ECB is ready to extend the current asset purchasing program. The euro was down 0.42% at $1.0688 against the dollar following the speech, falling under the weight of Draghi’s words.
It was the second dovish speech in a week for Draghi, who continues to hint that a ramping-up of the ECB’s trillion-euro asset purchase program could be announced in December.
According to the minutes of the meeting, the risk of growth-sapping deflation has increased since the ECB’s projections in September and the central bank is anticipating that the inflation rate will take longer to move back to its 2 percent target.
“The impact of external factors and heightened uncertainty raised the possibility that the ECB’s measures, despite their magnitude, might not be gaining sufficient traction in the present environment to achieve their ultimate objective in terms of inflation rates,” the minutes stated.
Meanwhile, the Bank of Japan (BOJ) maintained its current pace of monetary stimulus, hoping that an economic recovery is in sight despite soft domestic capital expenditure and challenging global business conditions.
A vote of 8-1 was made in the wake of Thursday’s data showing exports in October fell for the first time in more than a year, stoking worries the world’s third-largest economy may struggle to recover from a recession.
As widely expected, the BOJ reiterated its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($650 billion) through purchases of government bonds and risky assets.
Last week’s FOMC meetings minutes showed a solid core of Federal Reserve officials were in favor behind a possible December rate hike. Markets are currently pricing in a 70% chance of a rate hike in December, but the concern for markets now is how quickly the Fed will administer subsequent rate increases.
These minutes validate the rather hawkish tone we inferred from the October Fed statement and Chair Janet Yellen’s subsequent comments before Congress. Barring any unanticipated market shocks, the FOMC has essentially locked itself into a December hike.
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USD: Core Durable Goods Orders m/m. Wednesday 25th November, 9.30pm.
I expect figures to come in at 0.4% (previous figure was -0.3%).
I expect figures to come in at 0.4% (previous figure was -0.3%).
