Draghi delivers his bazooka

The ECB and its President Mario Draghi took center stage last week. Draghi once again did not disappoint, surprising markets with a vast package of measures to resurrect Europe’s economy. Draghi cut its main interest rates and expanded its bond buying program. However, the Euro appreciated drastically across the board as a bout of Euro strength occurred during the afternoon after hawkish comments from the ECB President.

ECB President Mario Draghi said the outlook for economic growth in the Eurozone had been revised slightly lower, mainly reflecting the weakened outlook for the world economy. However, Draghi added that he did not anticipate the need to reduce rates further. The comments lead to Euro strength as the relatively hawkish comment hit the wires. The ECB cut its benchmark interest rate by 5 basis points to 0% and increased its monthly purchases to €80bn in order to combat low inflation and the Eurozone’s current poor economic performance.

Elsewhere over the weekend, we’ve seen more bomb attacks in Turkey and a poor showing from German Chancellor Angela Merkel’s ruling CDU party in regional elections over the weekend. Although there is no immediate risk for the market with Merkel’s comments, but if her warning power continues, there will be implications for Germany’s place and power in Europe.

Today

A relatively quiet day on the docket, with no high tier data released. 

Tuesday 

Key inflation data from the US will grab Tuesday’s headlines. We also have the release of a key piece of tertiary sector data in the form of Core Retail Sales from the world’s largest economy. Although these releases are unlikely to change the rate hike expectation, we still may see relevant movement in the markets during the release of these two readings. 

  • US PPI 
  • US Core Retail Sales

Wednesday 

Arguably the biggest day in the markets this week. We have a raft of data scheduled for release. Firstly, the UK unemployment rate is forecast to remain at the lows last seen in 2006 at 5.1%. The Annual Budget will also be released, starting at 12:30 this afternoon. After the European markets close the FOMC minutes are released. These could contain some key clues to the FOMC’s thought process in terms of further rate hikes during this year. No rate hike is expected but the big question will be whether or not the Fed are looking to carry on with gradual tightening this year. 

  • UK Unemployment Rate 
  • UK Annual Budget 
  • US CPI 
  • FOMC Statement and Press Conference

Thursday 

No policy changes are likely today, but with the Bank of England looking increasingly dovish there is the possibility we may get further talk of interest rate cuts rather than increases. Following this, the US release their Philly Fed Manufacturing index, forecast to tick slightly higher but remain in negative territory at -1.4. 

  • Bank of England Rate Decision and vote 
  • US Philly Fed Manufacturing Index

Friday 

We finish the hectic week with a relatively quiet day in the markets. The only notable release today is from the US in the form of the University of Michigan Consumer Sentiment, forecast to tick slightly higher to 92.1. 

  • US University of Michigan Consumer Sentiment