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25 Apr 2013
Forex Flash: Bad economic news is good financial news for Euro amid ECB cut expectations - DBS Group
FXstreet.com (Barcelona) - DBS Group analysts note that European stocks were up and sovereign yields down, as the latest bout of poor Eurozone economic data heightens expectations of an ECB rate cut as soon as May 2nd.
ECB Deputy President Vitor Constancio said that inflation was going down significantly, and that the central bank was ready to further loosen its already accommodative conditions if the economy kept worsening. Then again, they note that Constancio also believes that commitment to fiscal consolidation and structural reforms are necessary preconditions for struggling EU nations to return to growth. Other ECB officials also argued that the effectiveness of another easing would be limited. They finish by writing, “Hence, a rate cut next week is still a possible but improbable outcome. Nonetheless, both EU leaders and the ECB need to find middle ground for a rate cut down the road as a signal for policy to returning to growth too. The ECB has provided a back-stop for troubled EU government bond markets during the crisis. Policymakers now need to do the same for the economy.”
ECB Deputy President Vitor Constancio said that inflation was going down significantly, and that the central bank was ready to further loosen its already accommodative conditions if the economy kept worsening. Then again, they note that Constancio also believes that commitment to fiscal consolidation and structural reforms are necessary preconditions for struggling EU nations to return to growth. Other ECB officials also argued that the effectiveness of another easing would be limited. They finish by writing, “Hence, a rate cut next week is still a possible but improbable outcome. Nonetheless, both EU leaders and the ECB need to find middle ground for a rate cut down the road as a signal for policy to returning to growth too. The ECB has provided a back-stop for troubled EU government bond markets during the crisis. Policymakers now need to do the same for the economy.”