ECB policy announcements and US data to boost market action

VaselineSeptember 12, 2024

0 3 minutes read

ECB policy announcements and US data to boost market action

Here’s what you need to know on Thursday, September 12:

Financial markets remain relatively quiet early Thursday as investors await the next batch of macroeconomic events. The European Central Bank (ECB) will announce monetary policy decisions on Thursday, and ECB President Christine Lagarde will talk about the policy outlook at a press conference. The US economic file will include weekly data on initial jobless claims and the producer price index (PPI) for August.

PRICE USD this week

The table below shows the percentage change in the US dollar (USD) against the major listed currencies this week. The US dollar was strongest against the Swiss franc.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.66%	0.65%	0.40%	0.03%	-0.25%	0.51%	1.06%
EURO	-0.66%		-0.05%	-0.22%	-0.62%	-0.95%	-0.14%	0.38%
GBP	-0.65%	0.05%		-1.44%	-0.56%	-0.89%	-0.11%	0.43%
JPY	-0.40%	0.22%	1.44%		-0.36%	-0.62%	0.11%	0.86%
CAD	-0.03%	0.62%	0.56%	0.36%		-0.23%	0.46%	1.19%
AUD	0.25%	0.95%	0.89%	0.62%	0.23%		0.80%	1.31%
NZD	-0.51%	0.14%	0.11%	-0.11%	-0.46%	-0.80%		0.54%
CHF	-1.06%	-0.38%	-0.43%	-0.86%	-1.19%	-1.31%	-0.54%

The heat map shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the US dollar in the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will be USD (base)/JPY (quote).

On Wednesday, mixed August US inflation data helped US dollar (USD) it remains resilient against its rivals. On an annual basis, the Consumer Price Index (CPI) rose 2.5% in August, down from a 2.9% rise in July. However, core CPI, which excludes volatile food and energy prices, rose 0.3% month-on-month, beating market expectations of 0.2%. The yield on the benchmark 10-year US Treasury bond recovered to 3.7% with immediate reaction to the CPI readings, and the USD index erased losses to end the day flat. Early Thursday, the USD index is holding steady above 101.50 and the 10-year yield is hovering just below 3.7%. Meanwhile, US stock index futures are trading marginally higher on the day.

The ECB is expected to cut key rates by 25 basis points (bps) after its September policy meeting. After a short recovery attempt, EUR/USD it lost traction and hit its lowest level since mid-August at 1.1000 on Wednesday. The pair remains in a consolidation phase above this level in the European morning on Thursday.

GBP/USD lost nearly 0.3% on Wednesday and posted its lowest daily close in three weeks. The pair is holding steady around 1.3050 to start the European session.

Naoki Tamura, a member of the Bank of Japan (BoJ) board, said on Thursday that he sees a very long way to end the easy policy. “We need to raise short-term rates in several stages while we examine how the economy and inflation respond to such steps,” he added. After hitting a new 2024 low of 140.70 on Wednesday, USD/JPY it reversed direction and was last seen trading modestly higher on the day above 142.50.

Gold closed modestly on Wednesday but managed to stabilize above. XAU/USD rallied early Thursday and was last seen trading slightly below $2,520.

ECB FAQs

The European Central Bank (ECB) in Frankfurt, Germany is the reserve bank for the euro area. The ECB sets interest rates and manages monetary policy for the region. The ECB’s main mandate is to maintain price stability, which means keeping inflation at around 2%. Its main tool to achieve this is by raising or lowering interest rates. Relatively high interest rates will usually lead to a stronger euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the euro area and six permanent members, including the president of the ECB, Christine Lagarde.

In extreme situations, the European Central Bank can implement a policy tool called Quantitative Easing. QE is the process by which the ECB prints euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually leads to a weaker euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis of 2009-11, in 2015 when inflation remained stubbornly low, and during the covid pandemic.

Quantitative tightening (QT) is the inverse of QE. It is undertaken after QE when an economic recovery is underway and inflation begins to rise. While in QE the European Central Bank (ECB) buys government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds and stops reinvesting the maturing principal in the bonds it already owns . It is usually positive (or bullish) for the euro.

VaselineSeptember 12, 2024

0 3 minutes read

PRICE USD this week

ECB FAQs

Vaseline

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