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Daily Archives: 13th June 2018

13th June 2018

Two more to go

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Time to move on…

It’s back to business. We’ve had our fill of geo(politics). The FOMC and ECB meetings loomed large in Wednesday’s session, the latter having much to contemplate given the recent weakness in the economic data in the Eurozone – which is looking like we’re not heading for a short, soft patch but could be looking at something more sinister. April’s Eurozone industrial production dropped by 0.9% versus March, against expectations of a 0.5% fall. The FOMC raised rates by 25bp as expected, but the ECB’s press conference on Thursday is going to be all the more interesting.

Our view is that the ECB will leave everything unchanged even if they might be champing at the bit to reduce some of the accommodation. The opening skirmishes of the trade war could lead to something altogether more profound and the central bank will need to make sure its policy reflects a significant worsening in it.

It is quite clear that Trump is flexing the US’ economic muscles and looking for a fight. He will be emboldened by the perceived success of his love-in with Kim Jong-Un. So the deposit rate should stay at -0.4% and QE will remain at €30bn per month for now. We might get more colour on the next step of their tapering move in the 26 July meeting, but a summer of macro-discontent would leave us looking for news come the 13 September gathering.

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