The ECB Monthly Bulletin summary:
- More easing policies needed to improve outlook for growth
- Credit growth remains weak, with net redemptions for banks (bank lend out less than what borrows return)
- ‘Structural Reforms’ needed to make Euro-zone more ‘flexible’
- Sovereign Bond Yields (read: Italy, Spain and Greece) to go down further due to fiscal consolidation in line with Stability and Growth Pact.
- Gradual growth expected by late 2013
- Inflation to be close to targeted 2%
EUR/USD pushed higher above 1.3340 following the release of the bulletin, despite the Bulletin not providing anymore insights into what we already knew. Draghi has been relatively upbeat about 2013, with statements saying Euro-zone is on its road to recovery which is echoed by many others. It is perhaps more pertinent to note the rally just before the release of the bulletin, due to German Vice Chancellor Philipp Rösler stating on record that “Germany willing to pay the price” to support the Euro currency. That certainly has more impact than more dross in the ECB report.
Should Germany be supportive of ECB’s policies, we’ll see less of the bickering last year, which at its height saw Weidmann threatening to quit over ECB’s bond purchasing plans. Rösler himself has also criticized the move. Hence a potential softening of his stance certainly pave the way for faster ECB actions to tackle outstanding problems.
Though reaction post ECB Bulletin is relatively muted, bulls will be glad that it at least helped to keep price above the 1.3340. This opens up the possibility for a retest of 1.34. Keep a keen eye on the market tonight as the US traders come in and digest Rösler’s comments.
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