Euro Weakens as ECB Cuts Economic Forecasts

Market Reviews

The euro is trading as the weakest currency after the ECB delivered a dovish shift, as expected. ECB let interest rates unchanged today as widely expected. That is, main refinancing rate, marginal lending facility and deposit facility rates are held at 0.00%, 0.25% and -0.40% respectively. The Bank also confirmed end of its quantitative easing (QE) program this month.

The European Central Bank also lowered both 2018 and 2019 growth forecast. Eurozone economic growth is now projected to be at 1.9% in 2018 (prior 2.0%), 1.7% in 2019 (1.8% prior), 1.7% in 2020 (unchanged) and 1.5% in 2021 (new). Meanwhile, inflation is projected to be at 1.8% in 2018 (1.7% prior), 1.6% in 2019 (1.7% prior), 1.7% in 2020 (unchanged), 1.8% in 2021 (new).

Swiss franc is trading mixed after SNB meeting. The Swiss national Bank kept sight deposit rate unchanged at -0.75% as widely expected. Three month Libor target range is held at -1.25% to -0.25% correspondingly. Meanwhile, Swiss growth is projected to be at 2.5% in 2018, slightly revised down. For 2019, growth is projected to slow to 1.5%.

The British pound is trading as the strongest one. UK Prime Minister Theresa May survived the leadership challenge yesterday. She’s now in Brussels for the EU summit.

Ifo cut German economic growth forecast in the Winter report released today. Economic growth forecast is revised down from 1.9% to 1.5% for 2018. GDP forecast for 2019 is revised down from 1.9% to 1.1%. For 2020, growth forecast is revised down from 1.7 to 1.6%. Today’s economic data from Germany showed, that CPI was finalized at 0.1% mom, 2.3% yoy in November.

On stock markets, FTSE fell 0.18%, DAX added 0.19% and CAC dropped 0.09%. Earlier in Asia, Nikkei rose 0.99%, Hong Kong HSI gained 1.29%, Shanghai SSE increased 1.23%, Singapore Strait Times added 0.36%.

US economic data showed, that initial jobless claims fell by 27k to 206k in the week ending December 8, better than expectation of 227k. Continuing claims rose 25k to 1.661M in the week ending December 1. US import price index declined by 1.6% mom in November.