Euro soars as ECB takes first steps towards slowing its stimulus – business live

All the day’s economic and financial news, including rolling coverage of a crucial European Central Bank meeting.

Q: What decisions do you think will be taken about your QE stimulus scheme in October?

We discussed a set of different scenarios today, Draghi replies.

Q: Your inflation forecasts only run up until 2019, but what do you think will happen in 2020?

I expect we will meet all our targets in 2020, smiles Draghi – without mentioning that his term will have expired by then.

So that’s that. Draghi says he expects ECB will finally hit its inflation target in 2020, the year after he steps down.

Draghi: All our goals will come to fruition 1 year after my term expires.
Trust me.

Asked about Emmanuel Macron’s economic plans, Draghi says France’s labor market reforms should aim at the “elimination of dualism”.

That’s the issue where new hires have weaker labour rights than long-serving workers, so they are laid off when a recession hits.

Q: Why is monetary policy so loose, when the economy is on track to grow much faster than in recent years?

Mario Draghi points to the “big labour market slack” to justify today’s record low interest rates.

best question yet for Draghi – why looser than 2007, 2010, 2012..?

Q: What does Mr Draghi think of Estonia’s plans to launch its own state-backed cryptocurrency?

No eurozone country can launch its own currency, Draghi insists.

Q: Should we just accept that eurozone inflation won’t get back to the ECB’s target?

Not at all, Draghi replies. We just need ‘confidence, patience and persistence’ while the recovery in the economy feeds through to prices.

Now a question about the future of the eurozone.

Q: What powers should any future eurozone finance ministry have?

Q: Are you concerned that the euro is trading above the levels at which your forecasts were drawn up ($1.18)?

I don’t know how much it’s trading, Draghi replies, before peeking at a note from his communications director, Christine Graeff….

Draghi: “I am told it’s 1.20”
[on €/$ exchange rate]#lol #supermario pic.twitter.com/d6WlYCzi9r

A journalist tries to lure the ECB president into commenting about the euro’s strength, by asking ‘professor Draghi’ to comment on when a strong currency becomes a problem.

I don’t comment on the exchange rate, Draghi replies firmly. I left university a long time ago, longer than I care to remember.

Draghi now denies that the eurozone is in a period of high uncertainty while the ECB plots its next move.

We’re simply discussing what to do next year, when our present programme expires, he adds.

Draghi: “I don’t think that we are in a period of great uncertainty”. Not exactly dovish.

Q: What steps must the ECB take to ensure that banks who move from the City to the eurozone after Brexit are supervised properly, as such big banks bring big risks?

Draghi volleys this question to his deputy, Vítor Constâncio.

Q: Are you worried about bubbles in the financial markets? (an issue raised by Deutsche Bank’s John Cryan yesterday)

No, says Draghi.

*DRAGHI SEES STRETCHED VALUATIONS IN COMMERCIAL REAL ESTATE MKT

*DRAGHI SAYS DON’T SEE SYSTEMIC DANGER FROM BUBBLES

Q: Do you take national government issues into account when deciding how and when to taper QE?

We act according to our mandate, Mario Draghi replies.

The euro has soared over $1.20, gaining more than 1.2 cents to $1.2040.

Eurocket.
Euro surges over 1% to $1.2050 pic.twitter.com/6628jcwkeE

Speaking of batting balls away….

I used to keep a baseball bat in the office. Today is a day when you need a baseball bat in the office

The bulk of our decisions about our asset purchase programme will be taken in October, Draghi says, in response to another question about QE.

Q: So will we get a full roadmap in October, saying how you might reduce the pace of the programme. Have you a personal preference?

Onto questions.

Q: Did you have any discussions about the future of QE today? And is the euro a problem at its current level?

Draghi does a Trichet: answering a question which was not asked to deliver main policy message. #ECB

DRAGHI SAYS #ECB DISCUSSION ON QE WAS VERY PRELIMINARY – BBG
It suggests that the final decision could be taken in December

Putting on his serious voice, Draghi declares that the implementation of structural reforms needs to be stepped up. That’s a nudge to Europe’s politicians to do their bit.

Newsflash: The ECB has raised its growth forecast for 2017 and 2018, and cut its inflation forecast in 2018 and 2019.

Draghi: GDP projections: 2.2% in 2017 [1.9% in June], 1.8% in 2018 [1.8%], 1.7% in 2019 [1.7 %]

Draghi: HICP projections: 1.5% in 2017 [1.5% in June], 1.2% in 2018 [1.3%], 1.5% in 2019 [1.6%]

Draghi sound cautious on inflation, saying that ‘core inflation’ has yet to show a convincing pickup.

Headline inflation could turn negative towards the end of the year, he adds.

Now we know that despite the latest drop in temperatures, 7 September does not qualify as ‘Autumn’ for Draghi. #ECB

Boom! Draghi says that the ECB will decide on the “calibration” of its policy beyond 2017 later this year.

That confirms that the governing council hasn’t made a decision on how to taper its stimulus programme yet.

Despite the recovery, the eurozone still needs a “very substantial degree of monetary support”, Draghi continues.

Hello! Draghi says that ECB is watching the euro’s volatility carefully, as it is a source of uncertainty.

Draghi attempts to talk down €. ‘Recent volatility in exchange rates represents source of uncertainty.’ #ECB

ECB president Mario Draghi begins his press conference by reading out today’s statement (details here).

He says that ECB’s outlook for the eurozone economy is “broadly unchanged”; a “broad-based” recovery is underway across all countries and sectors.

It’s Mario time….

Here we go lads, here we go pic.twitter.com/G4o64J6SIz

Live shots of Draghi getting ready for the ECB press conference pic.twitter.com/nZnGtkBHFo

Reuters correspondent Francesco Canepa reckons the strength of the euro deterred the ECB from tightening monetary policy today….

Spooked by #EURUSD rally, #ECB leaves door open to even more money printing, as @Reuters reported a week ago

City traders will now be scrambling for a quick sandwich before the main event of the day, Mario Draghi’s press conference in 30 minutes

Although today’s statement was unchanged, Draghi could still surprise us when he’s asked about the ECB’s thinking around its stimulus programme.

When the ECB tasked its relevant committees to study policy options in Sep-16, it wasn’t in the 13:45 press release. Still likely today. t.co/PKp86AUvue

Kerim Derhalli, CEO and founder of investing app Invstr, says the ECB was right to leave interest rates on hold.

“The ECB is conscious of lagging inflation rates and will not want to see a further rise in the Euro for fear of stifling economic recovery, which is largely driven by Germany’s export performance”

Today’s statement from the European Central Bank may sound curiously familiar. But don’t worry, it’s not a case of deja vu.

The ECB has simply repeated July’s statement, while taking the time to tweak the date.

CTRL C + CTRL V pic.twitter.com/6jwWENoJot

I didn’t see any differences between Sept. ECB statement and July statement. Any taper signal would likely have to come in press conf.

No rate move, no change in QE horizon, no removal of QE bias. #ECB stays put.

It’s official, the European Central Bank has not made any changes to its stimulus programme.

Instead, it is maintaining its promise to buy €60bn of new bonds each month until at least the end of December 2017. And it also promises to boost the programme if needed, to keep inflation on track.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

Monetary policy decisions t.co/MigyAml4hE

The ECB also says that it expects to leave its interest rate at their present levels “for an extended period of time, and well past the horizon of the net asset purchases”.

That’s not a change of policy, though.

Breaking! The European Central Bank has left interest rates unchanged across the eurozone, at their current record lows.

That means the headline borrowing cost remains at 0.0%.

European stock markets are still up, too:

Markets before ECB: $EURUSD up at $1.1978$DAX up 0.9% $CAC up 0.7%$GBPEUR off at €1.0931
10-yr bund yield at 0.356%

With the ECB’s decision just moments away, the euro is up 0.5% against the US dollar at $1.1975.

Here’s a reminder of what the markets are looking for from the ECB today:

1) What’s the QE plan? Traders want to hear clues about how the ECB will handle its bond-buying programme beyond December. Currently it is buying €60bn of bonds per month; will we hear plans to taper it in January?

Tensions is mounting….

One hour to go #ecb

European stock markets are pushing higher, with traders citing relief that America has avoided the danger of a default later this month.

Wall Street and the City have been cheered by the (rare) sight of Donald Trump clinching a deal with lawmakers on Capitol Hill, to extend the debt ceiling by three months.

The real news was Trump working with Democrats. In rare bipartisan deal, Trump, Republicans and Democrats extended the U.S. debt limit and provided government funding until Dec. 15th. Should the Republican-led Congress pass the bill, the 3-month deal would prevent an extraordinary default on U.S. government debt and keep the government funded for the fiscal year starting Oct. 1.

This was a massive first step. True, it was tied to relief assistance for victims of Hurricane Harvey, but still, the path towards meaningful tax reform (and potentially other stimulus) just got a little less steep. We were perhaps premature in writing off the Trump pro-growth, reflation story – a shift to the center, highlighted by this 3-month extension, could be the start of something real. A unified US government could have profound effects on our market outlook.

Emmanuel Macron has touched down in Athens to begin his visit to the Greek capital

The vision of #Europe has arrived in full force. #greece #Macron t.co/6oMWNhvATK pic.twitter.com/8hVod00eYI

French President Emmanuel #Macron arrives in Athens: t.co/yHD1MRedD2 pic.twitter.com/j90r6DmRUA

Higher still and higher goes the euro….

Euro toying with $1.20 again ahead of the ECB meeting. pic.twitter.com/QOAaAg4o7t

Over in Athens, draconian security measures are being taken ahead of the French president Emmanuel Macron making his first official visit to the the country.

More than 2,000 police officers have been seconded around the city centre – including 700 special forces – as Greece prepares to lay out red carpet for the leader of the country that he stood by it throughout the euro zone crisis.

#Athens: Painting attack on the French Institute before French President Emmanuel Macron arrives.#antireport pic.twitter.com/sGi529D6MY

“A Greek exit would signal, sooner or later, the end of the euro … the best way to avoid the exit of any member state is to draw up an ambitious plan.”

Draconian security in #Athens as #French president makes highly symbolic visit to #Greece t.co/DzBMugN9wc

Here’s a chart showing the eurozone’s economic recovery:

Euro Area economy grew 0.6%q/q in Q2 according to latest Eurostat figures, with solid contributions from all major expenditure components. pic.twitter.com/mlP8bkcMcs

New figures have confirmed that the eurozone economy grew by 0.6% in the second quarter of this year.

Britain and Portugal were the slowest members, with both economies growing by just 0.3% between April and June.

Euro area GDP +0.6% in Q2 2017, +2.3% compared with Q2 2016 #Eurostat t.co/9wiZUmOzHn pic.twitter.com/jjmxKVRb57

Matt Simpson, senior market analyst at Faraday Research, warns that the euro could tumble if Mario Draghi is more cautious than expected today.

He writes:

We don’t expect Mario to come out swinging today, but it may only require a tweak of CPI projections, casual reference of a high Euro or hint that QE normalisation talks are underway which could whip markets into a frenzy.

If ECB were to downgrade economic projections, it would be in line with Draghi’s doubt that Europe’s reflationary run remains self-sustainable. Markets would likely take this as strong clue that QE normalisation is pushed well back into 2018 and Euro could find itself under remarkable pressure.”

Excitingly, there’s no clear consensus on what the European Central Bank will do at today’s meeting.

Several experts think the decision on its stimulus progamme could be delayed until October, while the ECB is also expected to raise its growth forecasts and cut its inflation ones.

We have less than four months left before the ECB asset purchase program ends, and the president of the ECB, Mario Draghi is reticent about the future path of the monetary policy. Month after month, the tapering process has been delayed while the recovery in the Eurozone has strengthened. The patient is not sick and there is no need for the lifeline….

Forget about pulling a rabbit out of the hat, when it comes to the ECB’s meeting on Thursday, I expect the statement to be immensely tailor-made. It is widely expected that the ECB would say that they have officially discussed the process of tapering in the light of their latest economic projections.

SEPTEMBER: talk taper, task committees, cut forecasts.
OCTOBER: announce QE extension of +6m/40bn€.
My #ECB preview: t.co/sqFD6NCqlH pic.twitter.com/r9O1CL1L9T

“ECB president Mario Draghi will give his most keenly awaited speech for a while this lunchtime as traders bet whether he’ll finally confirm plans to cool the central bank’s stimulus programme.

“With the eurozone economy growing consistently and inflation higher, there’s certainly a strong argument to reduce monthly bond-buying from the current €60 billion. However, with the euro still firmly above $1.19, there’s a strong feeling that Draghi will delay any decision until October at the earliest.”

“The ECB will Set up Markets Today for a QE Decision in Q4” @ClausVistesen t.co/b5pG8K0sc4 #PantheonMacro pic.twitter.com/N1P9pLd6Ex

The crucial question facing the ECB is whether Mario Draghi will announce the date of cutting bond purchases. The decision to taper asset purchases was widely expected to occur in today’s meeting, after Mr. Draghi hinted on 20 July that the discussion on tapering assets should take place in Autumn. Since then, the Euro has appreciated by more than 4.8% against the dollar, but declined slightly after peaking at $1.2069.

Technically, the Autumn season starts towards the end of September, so even if Mr. Draghi decided to delay the announcement of tapering the asset purchase program, this wouldn’t affect his credibility. However, the day of the announcement isn’t the only key driver of the Euro’s direction; it’s the game plan going forward.

The euro is continuing to rise against the US dollar, as traders wonder whether the ECB will take a decision on tapering its stimulus programme today.

Are you as nervous as the euro on this big #ECB day? pic.twitter.com/vAFsIstBo2

Surprise! British house prices rose by a positively perky 1.1% in August, according to the Halifax’s monthly survey.

That’s the highest reading in eight months.

House prices;- pic.twitter.com/uPsndLeV4n

Halifax UK HPI Aug-17:
3m/yoy: 2.6pc (prev 2.1pc)
mom: 1.1pc (r prev 0.7pc) pic.twitter.com/cRu1J0sG3Q

Newsflash from Sweden: The Riksbank has left interest rates unchanged at their current record low of -0.5%.

*SWEDEN’S RIKSBANK LEAVES KEY RATE UNCHANGED AT -0.500%

Unch rate and repo rate path from the Riksbank. Still worried about SEK ie monetary policy cannot deviate clearly from other central banks.

European stock markets have opened a little higher, with the FTSE 100 gaining 11 points or 0.15%.

#CNBCTV18Market | Europe trades higher ahead of ECB rate decison pic.twitter.com/X8Gr9w5gCs

The euro is creeping higher in early trading, up 0.2% to $1.1935, as traders await news from the ECB.

This table from ING shows how the euro could react to today’s decisions.

It’s the big ECB meeting today. What are Draghi’s options? pic.twitter.com/89cMvjVj9X

Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Would this qualify as Fall weather in Frankfurt today? #ECB pic.twitter.com/bPgbppK0EO

The first is that the ECB will announce a full-scale tapering of their purchases by 50 billion which would give a massive push to the Euro that will rally towards $1.21 and also change its outlook to clearly positive.

The second option is that the ECB will announce a smaller scale reduction of their program – possibly by 20 billion or so – which would be positive for the single currency, and could send the euro above $1.20 but the mixed reaction from the market would mean that gains would be capped;

Related: Time to raise eurozone interest rates, says Deutsche Bank chief

Related: Trump ignores Republicans on Democrats’ debt limit and Harvey funds plan

Continue reading…

Link to article: www.theguardian.com/business/live/2017/sep/07/markets-euro-european-central-bank-mario-draghi-stimulus-business-live

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