ECB Take Centre Stage

The loonie falls after a dovish BoC ahead of today’s much-anticipated European Central Bank meeting

Previous Day's Market Highlights

Wednesday’s main event was the latest Bank of Canada (BoC) monetary policy meeting where, as expected, interest rates were kept unchanged at 1.75%. However, despite not making any changes to monetary policy, the BoC struck a dovish tone, emphasising that the global economic slowdown is more pronounced than expected and that trade tensions are weighing on the domestic Canadian economy. Furthermore, the BoC’s explicit hiking bias was removed from the accompanying rate statement, with the Governing Council indicating that a rate “below neutral” is currently appropriate. In reaction to the statement, the Canadian dollar fell by around 0.7%, falling to its lowest levels agains the US dollar since early January.

Elsewhere, most major currencies were confined to tight trading ranges as investors remained cautious ahead of today’s ECB meeting. The euro recorded modest gains, though lost momentum on reports that the ECB would steeply downgrade their economic forecasts at today’s meeting. Meanwhile, the pound was unmoved with no economic data or notable Brexit headlines to spark volatility. In contrast, the US dollar nudged slightly lower after weaker than expected trade and employment figures, while the Aussie dollar continued its decline, losing 0.8% over the day, as markets priced in an RBA rate cut by the end of the year.

In other asset classes, European equities gained, with the pan-European Stoxx 600 adding 0.2% and most sectors closing in positive territory. In contrast, US markets fell for their third straight session, with the S&P 500 falling 0.65% - the index’s biggest one-day decline in a month. Finally, oil prices also fell, with US benchmark WTI losing nearly 1% as a surge in US stockpiles weighed down prices. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1645 1.1724 1.1312 3.51%
GBP/USD 1.3170 1.3350 1.2773 4.32%
EUR/USD 1.1310 1.1419 1.1233 1.63%
GBP/AUD 1.8702 1.8775 1.7990 4.18%
GBP/NZD 1.9416 1.9542 1.8660 4.51%
GBP/CAD 1.7694 1.7723 1.6973 4.23%

Today's Market Highlights

Today’s main focus will be the latest monetary policy announcement from the European Central Bank (ECB). Although interest rates are expected to be kept on hold, the ECB are likely to strike a cautious tone in light of continued soft economic data from the eurozone. Expectations are for the Governing Council to downwardly revise both GDP growth and CPI inflation forecasts for the remainder of 2019, further paring back expectations of an interest rate increase. Other potential dovish policy measures include a change to the ECB’s current forward guidance of rates being on hold “through the summer of 2019” or the announcement of new TLTROs (cheap, long-term funding for banks) - though neither is likely to be announced today. Any upside for the euro is likely to be limited by the ECB’s continued dovish stance and potential announcement of further policies to stimulate the economy. 

Elsewhere, the UK economic calendar is devoid of any notable economic data for the second consecutive day, with the pound’s next direction remaining closely tied to the ongoing Brexit negotiations. It is a similar story in other major economies, with little in the way of major economic data to for markets to digest. Focus is likely to fall on revised GDP figures from the eurozone as well as the US weekly jobless claims figure ahead of tomorrow’s labour market report. Final GDP, trade balance and household spending data will also be released from Japan overnight. 

Finally, the central bank speaking calendar is relatively busy with markets set to hear from BoE policymaker Tenreyro, Fed Governor Brainard and the BoC’s Patterson - with the latter likely to reiterate yesterday’s dovish policy message. 

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Revised GDP (q/q) 0.2% 0.2%
10:00 EUR Revised GDP (y/y) 1.2% 1.2%
12:45 EUR ECB Rate Decision 0.0% 0.0%
13:30 EUR ECB Monetary Policy Statement & Press Conference
13:30 USD Initial Jobless Claims 225k 225k