Will Constancio move the Euro today?
By Yann Quelenn
At 15.45 Central European Time today, European Central Bank Vice President, Vitor Constancio will address a workshop called ‘Monetary Policy in Non-Standard Times’. Appropriate title – so, will he give some clues to the ECB’s next moves? Rumours are that the ECB, at its next monetary policy meeting on 26 October, will reduce bond buying from 60 billion euros a month to 20 or 40 billion euros a month. We are not yet convinced that the ECB will make this move in October.
In early September, Constancio said that low inflation will persist, particularly due to economic difficulties of the United States and geopolitical risks. The ECB’s massive bond-buying is not delivering the expected results. Most short-term European government bonds are trading at negative interest rates, and it has been some time since investors have trading bonds for capital appreciation (rather than yields), because money is free. When the ECB removes its stimulus, it could trigger massive losses in various asset classes.
Today’s new inflation data unlikely to move pound sterling
By Arnaud Masset
As August inflation data for the UK are released today, they are unlikely to move the GBP significantly. The Bank of England has said it will tolerate higher inflation, so it is unlikely that the pound will rise sharply should inflation accelerate more than expected. Similarly, an undershoot of expectations won’t trigger a pound sell-off, as it will only bring the gauges closer to the BoE’s target.
August’s consumer price index is expected to rise 2.8% year on year, reflection rising fuel prices and a weak pound. The core gauge, which excludes the most volatile components, should overshoot the BoE target of 2% by about 0.5%, say forecasts.
Brexit seems to be advancing. Parliament yesterday approved a bill to repeal the 1972 European Communities Act. This is just the beginning of Britain’s long journey out of the EU.