Daily Commentary BY THE CURVE TEAM –

Steady As She Goes For ECB

13th of April, 2018

US President Trump was in headlines once again, this time for the right reasons and had markets jumping at the news. By contrast, European output complimented the dovish tone we heard from their meeting back in March.

Early in President Trump’s tenure as US President he made the drastic call to pull out of the Trans-Pacific Partnership trade deal. Reports overnight indicated that Trump was considering rejoining the deal.

The administration remains confident that the US is heading in the right direction towards resolving trade negotiations without any impact on the economy. Markets were back up on the news with equities and bonds both drifting higher.

On the other hand, the latest Eurozone industrial output figures only added to the view that the pace at which the ECB normalises monetary policy will be slow.

Industrial production in Europe came in weaker than expected, falling 0.8% for the month with the yearly figure still at 2.9%. The surge in energy output was not enough to offset the slump in capital and consumer good consumption.

With the ECB looking to follow in the footsteps of their American counterparts, this only urges a patient approach. This was something that was reflected in the minutes from their meeting back in March, where members voiced concerns on trade conflict. Since the meeting, US-China trade negotiations have whipsawed back and forth.

The council is looking to end its bond buying program and return to more normal monetary policy settings, and this is something that is expected to be discussed further when the ECB meet at the end of the month. However, one key quote indicates that the end could still be on the end of the horizon,

However, the broadly agreed conclusion was that the evidence for a sustained rise in inflation toward levels consistent with the Governing Council’s inflation aim was still not sufficient.

Only time will tell.

Fair bit going on today with the highlight domestically being the RBA’s Financial Stability Report. While offshore there is a raft of data out of China and Europe.

Oliver Parsons

Client Relationship Manager