Euro tumbles broadly after ECB delivered and all-the-way dovish meeting. There will be no rate hike until at least 2020. New TLTRO-III is announced. ECB expects sizeable moderation in growth. GDP growth forecast was revised down substantially. Yet, risks surrounding outlook are still tilted to the downside. Selloff in Euro is dragging down other European majors, as well as German 10-year yield, which is back below 0.1 handle.
Staying in the currency markets, commodity currencies are surprisingly the strongest ones today, despite dovish outlook on RBA, RBNZ and even BoC. Pull back in global treasury yield could be a factor helping them. Even US 10-year yield is now back below 2.7 handle and is moving downward. Overall, Yen and Dollar are mixed.
Technically, EUR/USD is heading back to 1.1215 low and break will confirm resumption of larger down trend from 1.2555. USD/CHF will likely test 1.0098/0128 resistance zone too. GBP/USD is back pressing 1.3109 but it’s stubbornly holding on to this support so far.
In Europe, FTSE is down -0.28%. DAX is down -0.16%. CAC is down -0.10%. German 10-year yield is down -0.033 at 0.095, back below even 0.1 handle. Earlier in Asia, Nikkei dropped -0.65%. Hong Kong HSI dropped -0.89%. China Shanghai SSE rose 0.14%. Singapore Strait Times rose 0.21%. Japan 10-year JGB yield dropped -0.0062 to -0.001.
All-the-way dovish ECB to keep interest rates unchanged longer
Euro drops broadly after an all-the-way dovish ECB meeting and takes European majors lower. ECB keeps interest range unchanged at 0.00% as widely expected. The central bank now expects to keep interest rates at present levels “at least through the end of 2019”, prolonged from “summer of 2019”. Also, TLTRO-III is announced, quarterly from September 2019 through March 2021. It’s aiming at preserving favorable bank lending conditions, and smooth transition of monetary policy.
In ECB’s post meeting press conference, President Mario Draghi said there are signs that “some of the idiosyncratic domestic factors dampening growth are starting to fade”. However, the weakening in data points to a “sizeable moderation in the pace of the economic expansion that will extend into the current year”. Underlying inflations “continues to be muted”. And weaker economic momentum is “slowing the adjustment of inflation” towards target.
Draghi added that Incoming have continued to be weak, in particular in manufacturing, “reflecting the slowdown in external demand compounded by some country and sector-specific factors”. And the impact is “turning out to be somewhat longer-lasting”. Thus, near-term growth outlook will be weaker than previously anticipated
In the new staff projections, GDP growth was “revised down substantially in 2019 and slightly in 2020”. GDP is projected to grow by 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021. They compare to December’s projection of 1.7% in 2019, 1.7% in 2020 and 1.5% in 2021. Risks surrounding outlook are “still tilted to the downside”, due to “geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.”
HICP inflation is projected to be at 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021. They compare to December’s projection of 1.6% in 2019, 1.7% in 2020 and 1.8% in 2021.
More on ECB: ECB Announces new TLTROs, Markedly Downgrades Growth and Inflation Forecasts
Eurozone Q4 GDP growth finalized at 0.2% qoq, employment grew 0.3% qoq
Eurozone Q4 GDP growth was finalized at 0.2% qoq, unrevised. Annually, GDP grew 1.1% yoy. Over the whole 2018, GDP grew 1.8%. During Q4, household final consumption expenditure rose by 0.2%. Gross fixed capital formation increased by 0.6%. Exports increased by 0.9%. Imports increased by 0.5%. Eurozone Employment growth in Q4 was finalized at 0.3% qoq, 1.3% yoy.
Also released in European session, Swiss unemployment rate was unchanged at 2.4% in February. Foreign currency reserves dropped to CHF 739B in February.
US initial jobless dropped -3k to 223k
US initial jobless claims dropped -3k to 223k in the week ending March 12, slightly below expectation of 225k. The four-week moving average of initial claims dropped -3k to 226.25k. Continuing claims dropped 50k to 1.755M in the week ending February 23. Four-week moving average of continuing claims rose 4.75k to 1.767M. Also release, US non-farm productivity was finalized at 1.9% in Q4, unit labor cost at 2.0%. Canada building permits dropped -5.5% mom in January.
BoE Tenreyo: Effect of Brexit uncertainty on demand increasingly evident
BoE MPC member Silvanna Tenreyo said the “effect of that Brexit uncertainty on demand has become increasingly evident in recent months”. The effect is most apparent in business as “investment has been falling in the UK at a time when it has been growing in our international peers; business confidence surveys have slumped; hiring intentions have fallen back.”.
There were also signs of impact on h