What have we learned from the ECB speakers?

Summary:

• Mario Draghi reinforces his dovish message during Sintra conference

• Erkki Liikanen warns that the interest rates may remain unchanged beyond summer 2019

• Euro depreciation accelerated Draghi’s speech with EURUSD touching a 1.1530 handle

On Monday the ECB Forum on Central Banking began in Sintra, Portugal. The event will last until Wednesday and the agenda is full of speakers from the world’s most important central banks. Today, an array of ECB members were scheduled to deliver their speeches with President Draghi speech gathering the most attention. A panel discussion featuring ECB’s Draghi, Fed’s Powell, BoJ’s Kuroda and RBA’s Lowe is scheduled for Wednesday (2:30 pm BST).

Mario Draghi, head of the European Central Bank, reinforced his dovish message we have heard during the latest post-meeting press conference. Let us recall that the ECB governing council decided to continue the QE programme in its current form until the end of third quarter and later to phase it out during the final quarter of the year. Moreover, European monetary authorities informed markets that any rate hike will not be coming sooner than in the second half of 2019.

In Sintra the central banker stated that ECB will be patient with regards to the timing of the first rate hike. Once that happens the Bank will take a gradual approach to the adjustment of its monetary policy. Draghi underpinned his belief that the inflation in the euro zone is picking up and the EMU economy shows strength. He claimed that the ongoing labour market tightening greatly reduced slack in the economy and raised expectations of the wage growth acceleration what in the end will lead to the pick up in the price growth as inflationary pressure will mount. Moreover, the ECB President highlighted three main sources of uncertainty for the European economy. These sources are:

• The threat of increased global protectionism

• Rise in the oil prices triggered by the geopolitical factors

• The possibility of persistent heightened financial market volatility

Apart from Draghi another ECB member delivered some interesting comments today. Erkki Liikanen highlighted that the timing is essential for the rate hike but the eventual decision whether to increase rates or not will depend on data. With regard to this he stated that we may actually see interest rates remain on the current levels even beyond the summer 2019. To sum up, the speeches of the ECB members did not bring anything we did not know from the post-meeting presser and were generally dovish.

The downward move on EURUSD accelerated after Draghi’s speech. The declines eased at 1.1530 handle. Keep in mind that we were observing sell-off prior to the Draghi’s speech therefore it cannot be named as a factor responsible for the poor performance of the common currency today. Source: xStation5