Euro takes a tumble: The European currency took a swift, sharp fall on Friday as the head of the European Central Bank – Mario Draghi – said the bank was ready to “do what we must to raise inflation as quickly as possible”.
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By Juhani Huopainen Today’s economic data calendar is light, and with investors’ attention firmly on the European Central Bank’s and Federal Reserve’s December meetings, the central banker speeches will be the main events.
Speaking at a banking forum in Frankfurt, he said that the European Central Bank would assess whether “if left to its own forces, the economy will be able to achieve a self-sustaining trajectory…”
At 9:00 am ET, Federal Reserve Bank of St. Louis President James Bullard will deliver a speech on the economy and monetary policy before the Fort Smith Chamber of Commerce in Fort Smith, United States.
Policy makers are weighing whether an expansion to the 1.1 trillion-euro ($1.2 trillion) quantitative-easing program started in March, or other measures such as taking the deposit rate further below zero, are needed.
Minutes of its October meeting showed that a few members were even starting to mull over the possible option of further cutting the ECB’s key lending rate, which is already at a record low of 0.05pc.
Weidmann has only one vote on the 25-member governing council, and his views appear to be in the minority among the bank’s leadership.
The aim being to stop inflation from falling further below the official target of just under two percent.
Expect the ECB’s December meeting to cut the deposit facility rate by 0.3%, increase the PSPP monthly purchases from €60 billion to €80 billion and again remind us that the PSPP would be extended beyond the current firm deadline of September 2014, should the inflation outlook not improve. Britain’s headline public borrowing rose to 8.2 billion pounds in October from 7.1 billion pounds a year earlier, higher than all forecasts in a Reuters poll that predicted borrowing of 6.0 billion pounds. The index has rallied 12 percent from its August trough and is 2 percent from its all-time high set in May.
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“This week in currency markets it has been much more about the euro than about the dollar”. The Canadian dollar weakened against the USA dollar on Friday, after Canadian retail sales declined but CPI printed slightly better figures. Draghi’s dovish remarks sent the euro plunging. For instance, Estonian central banker Ardo Hansson said in an interview with The Wall Street Journal last week that there was no reason for the central bank to lower interest rates.
