the daily chartist

ECB Press conference recap

published 2 years ago

 June 2018 ECB press conference highlights:

  • Progess toward sustained adjustment of inflation substantial
  • Longer term inflation expectations well anchored
  • Confident that convergence to TGT will continue
  • Convergence to target will be maintained even after asset purchase program
  • Significant policy stimulus still needed
  • Support will be provided by net asset persistently in the year
  • The ECB will remain vigilant and adjust all its instruments as inappropriate to ensure inflation moves toward the government councils target
  • moderation of growth includes temporary factors, external trade and uncertainty
  • says growth remains solid and broad-based
  • the latest economic results are weaker but remain consistent with ongoing and solid economic growth
  • consumption is supported by ongoing employment gains, and growing household wealth
  • housing demand remains robust
  • 2018 GDP growth at 2.1% versus 2.4% in March
  • 2019 GDP growth of 1.9% versus 1.9% in March
  • 2020 GDP growth at 1.7% versus 1.7% in March
  • risk surrounding growth outlook broadly balanced, but uncertainties including threat from global trade and protectionism
  • headline inflation likely to hoover around current levels for remainder of the year
  • levels of underlying inflation remain generally muted
  • ECB expects 2018 inflation at 1.7% versus 1.4% in March
  • ECB expects 2019 inflation 1.7% versus 1.4% in March
  • ECB expects 2020 inflation and 1.7% versus 1.7% in March
  • inflation forecast changes reflect mainly oil prices
  • broad-based growth calls for rebuilding of fiscal buffers, particularly in countries where government debt remains time

 The ECB lowered growth prospects for 2018 and remained growth unchanged going forward. The see higher inflation but the expectations remain below the 2.0% target still. 

 Draghi Q&A recap and highlights:

  • Assessment of counsel: doesn't want to underplay risks
  • softer patch 1st seemed to extend into second-quarter in some countries
  • Sees increasing uncertainty from risks
  • The soft patches will continue in some countries in Q2
  • By and large the situation is overall similar and risks remain broadly balance
  • Increase in geopolitical uncertainty and domestic uncertainty.
  • On growth should see progress on growth from fiscal expansion in United States and in medium-term euro zone
  • did not discuss reinvestment policy.  Will discuss at future meetings
  • market reaction shows inflation self sustained
  • The characteristic on policy remains be patient, prudent, and persistent. The decision was unanimous
  • There's a desire to keep optionality open
  • Draghi says asset purchase program is not disappearing.  It remains in monetary policy toolbox
  • Did not discuss tapering options
  • We should dramatize changes in government policies too much
  • Italy discussion not meaningful today
  • Expects rates to remain unchanged to at least the summer of 2019
  • If through the summer meant September, we would have said September (HMMMMM)
  • Through the summer was intentially not precise
  • We have not decided reinvestment yet. It is an important decision. It is not a marginal decision
  • Reinvestment is one of our main policy tools
  • The projections do not contain trade measures not implimented yet. 
  • The direct effect from trade measure are pretty limited
  • If there is general retaliation, effect could be more significant
  • The effect of trade measures and retaliations are also on confidence. Which is hard to measure.

 This is the overall reaction from the Euro on the M30 chart. As you can see it first has risen sharply to 1.18510, after that it crashed hard with a spectacular move of 185 down towards 1.16565. This will act as local resistance for the movement to continue the decline. We have entered US session as well. There will be short - covering moment for sure with a moderate pullback on the price, but we may see it continue dropping further under 1.16500. The market will need some time to digest everything for the market particiapnts to position themselves on the new fundamentals and sentiment.