Hot Topic – the European Central Bank

By | July 26, 2016

this week’s topic is the European Central Bank – so let’s talk about what Happened.

  • On Thursday, the ECB decided not to proceed along with changes to the bloc’s monetary policy and additionally left interest rates unchanged.
  • The EUR/USD immediately jumped 50 pips peaking at 1.1058.
  • While on Friday the U.S. dollar rallied to a four-month high versus a basket of major currencies, boosted by the monetary policy outlook.

So what led to this situation?

  • In the conference that followed, ECB President Mario Draghi commented on Brexit and the geopolitical instability resulting from the decision.
  • He additionally highlighted the declining state of the Eurozone’s banking industry
  • The decision taken on Thursday means that the main refinancing rate remains at 0%, the marginal lending facility rate at 0.25%, and the deposit facility at -0.40%.

So What’s going on This week?

  • Investors will be looking atWednesday’s highly-anticipated FOMC statement for guidance on the pace of future US interest rate hikes which is at 6PM GMT
  • While on Friday, the markets await amonetary policy announcement from the Bank of Japan amid growing expectations for further stimulus.
  • Lastly, be sure to keep your eye on the GBP – Since the U.K. shocked the markets along with their decision to leave the EU on June 24, the pound has actually already declined nearly 12% versus the dollar and analysts are expecting further declines

That’s it for this week once again I’m Nima and you’ve been watching the Hot Topic.

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