ðŸ•ĪECB chair, Christine Lagarde press conference starts. EURUSD loses 📉

20:50 25 āļĄāļāļĢāļēāļ„āļĄ 2024

After ECB hold both interest and deposit rates unchanged at 4.5 and 4% respectively, chair Christine Lagarde starts press conference. 

ECB Lagarde

āđ€āļĢāļīāđˆāļĄāđ€āļ—āļĢāļ”āļ—āļąāļ™āļ—āļĩāļ§āļąāļ™āļ™āļĩāđ‰ āļŦāļĢāļ·āļ­ āļĨāļ­āļ‡āđƒāļŠāđ‰āļšāļąāļāļŠāļĩāļ—āļ”āļĨāļ­āļ‡āđāļšāļšāđ„āļĢāđ‰āļ„āļ§āļēāļĄāđ€āļŠāļĩāđˆāļĒāļ‡

āđ€āļ›āļīāļ”āļšāļąāļāļŠāļĩ āļĨāļ­āļ‡āļšāļąāļāļŠāļĩāđ€āļ”āđ‚āļĄāđˆ āļ”āļēāļ§āļ™āđŒāđ‚āļŦāļĨāļ”āđāļ­āļ›āļĄāļ·āļ­āļ–āļ·āļ­ āļ”āļēāļ§āļ™āđŒāđ‚āļŦāļĨāļ”āđāļ­āļ›āļĄāļ·āļ­āļ–āļ·āļ­
  • The key ECB rates are now on restrictive levels and the bank hold it as long as it will be necessary
  • Decisions are based on data, policy transmission and inflation outlook
  • Eurozone economy is likely to have stagnated in Q4, but data shows that it can improve in 2024 
  • Some surveys also point to growth further ahead, however data signal weakness in the near term
  • Growth may be higher as real wages support the demand in the economy
  • The demand for labor is slowing, but the labor market is still robust
  • Higher wages may be inflationary
  • Future oil and gas prices as well as shortages may hit the eurozone, especially if global growth will slow
  • It's still premature to talk about rate cuts
  • Shipping costs are increasing
  • Inflation rebound in December was weaker than expected (economic slowdown, negatively for euro)
  • Inflation will probably fall later in 2024
  • Rate cut in the summer is still possible

As for 2 PM GMT, there are no very hawkish comments from Lagarde and EURUSD loses almost 0.2%. Markets expect at least 1 rate cut, before the June 2024.

  • Lagarde reaffirms that 2% inflation target is still a priority
  • Slight decline in negotiating wages is favorable for ECB but this still an increase 
  • The bank doesn't expect second wave of inflation (profit unit will probably come down, and it's actually happening)
  • The consensus says that it is too early to cut interest rates.
  • ECB sees some stabilization in terms of wages 
  • The wage growth trajectory is good for inflation
  • Christine Lagarde hopes for a decline in inflation and stable wage growth, which will allow for economic recovery
  • Last PMI data from eurozone were quite positive for the economy, signalizing stabilization
  • Lagarde also told that fiscal policy will be observed closely, signalling that ECB will have to react if eurozone member countries withdraw a fiscal support for energy prices
  • Disinflation should be stronger to support ECB policy change
  • ECB chair hopes that real wages growth and lowering price pressures will end in economic expansion after a period of slowdown

The market is already pricing in more cuts this year than before the meeting. EURUSD is around 1.0860 levels now.

Source: xStation5

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