ECB Opens The Door For Future Stimulus.

By the end of Thursday the main talking point surrounded the latest ECB press conference. There was speculation ahead of the announcement that key rates would be cut however that turned out not to be the case. The accompanying statement and press conference did appear to signal that some action will be taken in September however Draghi seemed to confuse markets by describing the economy as getting “worse and worse,” before suggesting there was no reason to be gloomy.

The euro initially weakened, hitting two year lows against the dollar before quickly snapping back the other way to touch daily highs across the board. Whilst any stimulus package will be seen a positive in order to kick start growth and inflation in the Eurozone, many investors will be concerned that we are now back to 2014 when the ECB were forced to intervene in order to aid the European economy once more.

Whilst the Federal Reserve are expected to cut interest rates next week, the dollar strengthened in afternoon trading as markets seemed to suggest this may be a one off event rather than the start of a major easing cycle. The pound was further hindered against the dollar as European Commissioner, Jean-Claude Junker, poured cold water on the idea that the Brexit withdrawal agreement could be renegotiated.

Friday gets off to a quiet start with little to no economic data releases of note this morning. The main focus today will be at 1.30pm when the US announce their preliminary GDP figures. Markets are expecting a reading showing Q2 growth of 1.8% which would be the slowest since 2017.

Economic Calendar

Expected Previous
13:30 USD Gross Domestic Product 1.8% 3.1%

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