ECB Stole the Show

Weekly Report - 18/06/2018

ECB shakes Euro

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The ECB caused havoc for the euro after its announcement that it expects interest rates "to remain at their present levels at least through the summer of 2019”. This was definitely the highlight of the week. Not even the FOMC meeting and subsequent rate hike decision was able to cause such big moves in the markets, particularly for the euro.

 

The Week that was


The euro plunged over 300 pips against the dollar soon after the ECB because the central bank’s case for keeping record low rates for another year was longer than markets expected.  So while the ECB announced it plans to end QE by the end of this year, the euro was mostly negatively impacted by the delay in rate hikes, especially as this was telegraphed a day after the U.S. Fed bumped up its rates by 25 basis points, with more to come this year and has already begun its rate hike cycle. Meanwhile, trade war tensions were escalated after the United States slapped $50 billion worth of tariffs on China.

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Main Focus This Week


The main highlight of the week will be the OPEC meeting that will be held in Vienna on the 22nd and 23rd. Representatives from 13 oil-rich countries will be present. Investors await to see what decision has been made with regards to oil production levels and this can have a significant effect on oil prices. Crude oil has been falling sharply in recent days on speculation that oil production will be ramped up based on a proposal from Saudi Arabia and Russia. WTI crude prices are trading below $64 a barrel.

This week we will have more Draghi speeches. Could he do more damage to the euro after his press conference following the ECB policy meeting? All eyes will still be on the central bank chief as he is due to deliver opening remarks at the European Central Bank Forum on Central Banking in Portugal on Monday afternoon. It is also important to note that Fed Chair Jerome Powell is also due to speak at the same event on Tuesday. Meanwhile the political crisis in Germany has been adding downward pressure to the euro. Later in the week, the market’s attention will be on the Bank of England policy meeting on Thursday.

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