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| European Central Bank (Photo credit: kumbarov) |
All eyes are on the European Central Bank interest rate decision after yesterday’s dismal economic data set showed the manufacturing and services sectors contacted at the fastest pace since June 2009 while the region-wide unemployment rate rose a record-high 10.9 percent. While an outright interest rate cut is not likely this time around with inflation holding at 2.6 percent in April, markets will look to the press conference from ECB President Mario Draghi to offer guidance on steps the central bank is prepared to take to alleviate what appears to be a deepening recession.
Hints of forthcoming easing – whether by outright rate cuts or LTRO-style efforts – are likely to weigh on the Euro. If Draghi opts to invoke the central bank’s singular mandate to assure price stability as a reason for inaction however, worries about the impact of an accelerating downturn in the Eurozone on global output at large may weigh on risk appetite and undermine sentiment-linked currencies while boosting the safe-haven ones. This may drag down the single currency against the likes of the US Dollar and Japanese Yen... Continue to read.
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