ECB Leaves Key Refi Rate Unchanged At Record Low

The European Central Bank on Wednesday decided to hold fire on rates, as any tightening will be premature and dampen early signs of recovery in the region.

The 23-member rate-setting council left the main refinancing rate unchanged at a record low 0.50 percent for the fifth month. The previous change in rate was in May, when it was lowered by a quarter point.

The bank held the marginal lending facility rate at 1 percent and the deposit rate was also left unchanged at zero.

The governing council gathered in Paris instead of its usual venue in Frankfurt and the meeting was brought forward to Wednesday as it is a public holiday in Germany on Thursday.

ECB Chief Draghi is set to hold the post meeting press conference at 8.30 am ET.

Although ECB Chief Mario Draghi recently hinted at long-term refinancing operation and measures needed to address rising money market rates, economists see no major announcement later today. The markets expects LTRO only later this year.

Given the doubts over the effectiveness of more LTROs though, other new measures to stimulate lending may eventually be needed to sustain the recovery, said Ben May, an economist at Capital Economics.

Money market rates have shown signs of rising recently on talks of Federal Reserve's "tapering" of bond purchases.

Elsewhere, Italian Prime Minister Enrico Letta faces a confidence vote today. Italy's political instability and its huge debt burden will weigh on the nation's borrowing costs and will once again trigger talks of ECB's bond buying program.

Last month, the ECB upgraded its 2013 economic outlook for the euro area, to show a 0.4 percent contraction, compared to the 0.6 percent GDP decline estimated in June. However, the growth projection for 2014 was cut to 1 percent from 1.1 percent.

Inflationary pressure remained subdued in the 17-nation bloc, with inflation falling to the lowest since early 2010 in September. Inflation is forecast to average 1.5 percent this year.

The sharp decline in lending to private sector together with low inflation amid nascent recovery is expected to prompt the central bank to keep its interest rates low for an extended period.

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2013-10-02 17:42

Swiss Franc Weakens Despite Upbeat Q2 GDP Report

The Swiss franc drifted weaker in early European deals on Tuesday despite a report showed that the nation's economic growth in the second quarter slowed less-than that of economists' predictions, largely due to positive contributions from private spending and investment.

According to figures published by the State Secretariat for Economic Affairs (SECO), the real gross domestic product expanded 0.5 percent sequentially, which was forecast to fall to 0.3 percent from the prior quarter's 0.6 percent growth.

As seen in the previous quarter, household spending gained 0.6 percent. Moreover, investment recovered strongly in the second quarter, up 1.4 percent after falling 0.2 percent. On a yearly basis, economic growth more than doubled to 2.5 percent from 1.2 percent a quarter ago.

Easing concerns over an imminent U.S. strike on Syria and further signs of economic improvement across the globe lifted the risk-associated currencies' values in the foreign exchange market on Tuesday.

The U.S. President Barack Obama's decision to carry out a limited air strike against Syria may be delayed until at least next week as Republican Senators John McCain and Lindsey Graham said they have more confidence the White House is developing a better strategy to back use of military force.

Equities also rallied after official data indicated another month of reasonably solid growth in Chinese service sector, with the non-manufacturing purchasing managers' index easing slightly to 53.9 last month from 54.1 in July.

Meanwhile, the British Retail Consortium said retail sales in the U.K. increased at a weaker-than-expected rate in August after an exceptional July. Sales value increased 1.8 percent year-over-year on a like-for-like basis, falling below expectations for 2.4 percent growth but keeping well above the 12-month average.

Elsewhere, the total labor cash earnings in Japan increased for a second consecutive month in July, albeit at a slower pace, data from the Ministry of Health, Labor and Welfare showed today. Total wages increased 0.4 percent year-on-year in July, following a 0.6 percent increase in June and a 0.1 percent decrease in May.

At the same time, the Reserve Bank of Australia decided to keep the benchmark cash rate unchanged at a record-low of 2.5 percent, with a possible depreciation of the currency expected to facilitate rebalancing of the economy.

Investors await a slew of reports on U.K. construction activity, producer prices from the euro area and U.S. ISM manufacturing all due out later in the day for further clues on the health of the global economy.

The Swiss franc slipped to 1.4584 against the pound around 2:45 am ET, having extended its strong sell-offs since its failed test of 1.42 resistance on August 28. With the GBP/CHF currency cross is staying well-above its 200-day simple moving average level, the franc is poised to extend its downtrend beyond 1.46 support in the near-term to set its lowest level since June 10.

The franc also fell to a fresh 2-week low of 0.9374 against the US dollar following the GDP numbers, pushing the local unit closer to the pivotal 0.94 area, a level not seen since August 15. The franc has been trading lower since its failure to challenge resistance around the 0.9140/50 area on August 20.

The Switzerland currency dropped to a weekly low of 1.2343 against the euro and a session's low of 106.21 against the yen following the data. The next bearish barrier for the Swiss franc is seen around the 1.2360 against the former and 106.0 against the latter, as CHF/JPY pair is receding well-below from a trend-line resistance of a symmetrical triangle.

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2013-09-03 12:42

Euro Down Against Dollar, Pound As ECB Stands Pat

The euro was trading lower against the dollar and the pound on Thursday after the European Central Bank decided to hold its interest rate unchanged at a record of 0.50 percent.

The European Central Bank left its interest rates unchanged for the third consecutive month in August amid some improvement in economic indicators, which is in line with its expectation of a gradual recovery later this year.

The Governing Council led by ECB President Mario Draghi left the main refinancing rate steady at a record low 0.50 percent as expected. The rate was slashed by quarter-basis point in May, the first rate cut in nine months.

The bank also held the marginal lending facility rate at 1 percent, following a 50 basis points cut in May. The zero deposit rate was also left unchanged.

At the same time, the Eurozone manufacturing sector expanded for the first time since July 2011, survey data from Markit Economics showed today. The Purchasing Managers' Index rose to 50.3 in July, from 48.8 in June and above the flash estimate of 50.1.

As widely expected, the Monetary Policy Committee headed by Mark Carney retained the asset purchase facility at GBP 375 billion and interest rate at a record low 0.50 percent.

In the U.K., the seasonally adjusted Markit/Chartered Institute of Purchasing & Supply Purchasing Manager's Index rose more-than-expected to 54.6 in July from a revised reading of 52.9 in June. The index reading was forecast to improve to 52.8 from June's originally estimated level of 52.5.

The U.S. Federal Reserve on Wednesday kept its ultra-loose monetary policy intact, voicing concerns over the recent rise in mortgage rates and low inflation. There was no language in the Fed's post-statement meeting that would suggest that the $85 billion a month asset-purchase program may be scaled back in the next few months.

The official purchasing managers' index (PMI) in China rose to 50.3 in July from 50.1 in the previous month, while a separate HSBC PMI survey showed factory activity shrank for a third straight month to its lowest level in 11 months. The headline PMI index fell to 47.7 from 48.2 in June.

The U.S. weekly jobless claims report showed that initial jobless claims fell to 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The decrease surprised economists, who had expected jobless claims to edge up to 345,000 from the 343,000 originally reported for the previous week.

The euro slipped to a 2-day low of 0.8678 against the pound around 8:30 am ET, pulling back from Asian session's fresh 4-month high of 0.8768. The near-term support for the euro is seen around the 0.8660 level, at which the 10-day EMA lies in the currency cross.

The euro dropped below the key 1.32 level against the US dollar, falling to a weekly low of 1.3192 by 8:30 am ET. The euro-greenback pair is presently hovering around the 1.32 level with 1.3165 seen as the next likely support level.

The common currency held steady against the Swiss franc and the yen after the ECB rate decision. The euro-franc pair was trading in a range of 1.2310 and 1.2330 and the euro-yen pair was trading between 130.80 and 130.40.

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2013-08-01 17:47

IEA Leaves Global Oil Demand Forecast Little Changed On Supply Disruptions

The International Energy Agency left its its global oil demand forecast for the year 2013 little changed following slightly lower-than-expected first-quarter 2013 deliveries. news.instaforex.com »

2013-04-11 14:18

S&P Affirms Japan's Credit Ratings

Standard & Poor's on Monday said it is affirming its credit ratings on Japan, citing the sovereign's strong external position and a recovered financial system.

The rating agency affirmed the long- and short-term credit ratings at AA- and A-1+, respectively. The outlook on the long-term ratings remained 'negative.'

S&P said its rating on Japan balances the extremely strong external position, prosperous and diversified economy, and its recovered financial system with a very weak fiscal position, aging demographics, and persistent deflation.

"We believe the measures adopted by the new Shinzo Abe administration at the beginning of its term will be critical if it is to arrest what we see as a prolonged decline in Japan's sovereign credit standing," the rating agency said in a report.

Meanwhile, during a debate in Parliament on Monday, Prime Minister Shinzo Abe indicated that if Japan is unable to attain the 2 percent inflation target, there may be a need to revise the law governing the central bank.

He also clarified that the recent policy moves are not directly aimed at weakening the yen, but is just one of the many factors influencing the exchange rate.

The meeting of finance ministers and central bankers of the Group of Twenty in Moscow over the weekend abstained from directly criticizing Japan for the recent depreciation of yen. Instead, they supported the policy actions taken by the new government and the Bank of Japan to stimulate economic growth.

At the same time, G20 vowed to refrain from competitive devaluation. "We will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open," the ministers and central bankers said in a statement on Saturday.

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2013-02-18 10:20