The ECB press conference with Christine Lagarde is underway. So far we have not learned anything that could change the current face of monetary policy in EMU. Key points:
- The economy is doing well, but growth is depressed
- Inflation is rising longer and remains high, despite previous expectations
- Multiple sources of core inflation add to growth
- High inflation creates uncertainty in markets
- Inflation at 5.1% y/y in January and will remain high in the near term
- Threat of reduced household spending
- Supply-side problems will pass but still affect the economy
The start of the conference saw a clear strengthening of the EUR, although overall it is difficult to talk about any signal. The ECB is not comfortable with inflation, but at the same time the bank is sticking to its previous statements about the passing of price dynamics in the longer term.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appQ&A
- Inflation is a worry for most members
- Discussion on inflation, but no latest projections
- ECB does not want to come out ahead with decisions, wants to have a basis for potential moves
- ECB will depend on data, need for discussion, need for analysis for inflation in the medium term (question about increases)
- ECB will consider forecasts, will discuss (evading answer as to whether ECB is considering hikes)
- There are concerns that the ECB should act
- In March and July the bank will consider whether inflation, labour market targets have been met
- The ECB has many options in relation to its tools to ensure inflation reaches 2% in the medium term
Overall, we can see some hawkish attempts from Lagarde, but they are very vague. Nevertheless, the market reads these words as hawkish and EURUSD bounces around the 1.1350 level.
The market seems to have mainly noticed that there is no absolute negation of inflation and mentioning that rate hikes are out of the question. Lagarde admitted that the situation has changed and at this point she cannot confirm her words that hikes are unlikely. Lagarde needs new data and forecasts to confirm or deny.
EURUSD is clearly rebounding during the ECB conference. Source: xStation 5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
