The results of the ECB

The results of the ECB

The results of the ECB

The results of the ECB and fed meetings will be the key events of December

Overall, November was a fairly quiet month. The focus of the markets was on macroeconomic data and statements from Central Bank representatives, which forced investors to revise their expectations about the prospects for monetary policy of the fed and the ECB.

One of the key events of the month was the publication of the report on the number of jobs outside of us agriculture for October, which exceeded the most optimistic forecasts and significantly increased the chances of an increase in the fed's interest rate in December. As it became known, the number of workers increased by 271,000 against +137,000 in September. The figures for September and August were revised up by a total of +12,000. As for the unemployment rate, it fell to 5.1% from 5.0%, reaching the lowest since April 2008. Experts expected that employment will grow by 180 thousand, and the unemployment rate will remain unchanged. Taking into account recent changes, the average number of jobs over the past 3 months has increased by 187,000 monthly. The share of the economically active population in October remained at 62.4% (at least since 1977). After the report was published, the fed's interest rate futures indicated a 70% probability of a rate hike in December, compared to 58% before the data was released.

In addition, Forex employment statistics led to a significant strengthening of the dollar against major currencies, especially against the Euro. At the end of November, the EUR/USD pair fell by more than 4%.


Many experts believe that in the medium term, downward pressure on the pair will continue, as a result of which it will reach the current year's minimum of $1.0460. The main reason for such dynamics will be the expected divergence of the Forex policy of the fed and the ECB. Recall that during the October meeting, ECB head Draghi hinted quite clearly about the possibility of further easing policy in December. Meanwhile, in the minutes of the October meeting, which was published on November 19, the ECB pointed to the concern of the ECB leadership regarding the fact that measures to stimulate the Euro zone economy did not have enough effect. However, the minutes did not say that further stimulus measures would be explicitly applied.

The market in November was also confined to the meetings of the world Bank, namely, the RBA, Bank of England, Bank of Japan. Recall that the RBA, as expected, left the interest rate at 2.00%, but politicians hinted that the Central Bank is ready to ease monetary policy. The RBA's accompanying statement noted that the economic Outlook has improved somewhat in recent months. and the Outlook for inflation may create conditions for further policy easing, but only if it is necessary to support demand.

As for the meeting of the Central Bank of England, it turned out to be more interesting, since in addition to the decision on the rate, new economic forecasts were published. Recall that the Central Bank decided to leave the rate at 0.5% and the asset purchase program in the amount of 375 billion pounds. Representatives of the Central Bank voted 8-1 to leave the rate unchanged. Only McCafferty was in favor of raising the rate. The Central Bank also said that the forecast for GDP at the end of 2015 was revised to 2.7% from 2.8%, at the end of 2016-to 2.5% from 2.6%. Meanwhile, the forecast for inflation at the end of 2015 was lowered to 0.1% from 0.3%, at the end of 2016-to 1.2% from 1.5%, at the end of 2017 - to 2.0% from 2.1%. According to experts, the signals from the Central Bank were at least ambiguous. The inflation report showed a less rigid stance on raising rates than expected, but Central Bank Governor Carney hinted at a slightly greater inclination to tighten.

Overall, mixed news from the Bank of England caused a sharp but short-term fall in the pound.

After that, the Central Bank of Japan held a meeting. As predicted, the Central Bank left its monetary policy unchanged. Central Bank policymakers have decided to refrain from extending stimulus even though the economy has returned to the recession phase. However, in their statement, policy makers slightly changed the rhetoric about inflation expectations. The Central Bank said that inflation expectations are generally rising in the longer term, although some recent indicators indicated relatively weak changes.

An important topic in November was also the decline in oil and gold prices. Thus, oil fell by almost 5.6%, and gold-by about 9.4%, reaching the lowest since January 2010. The reasons for the fall in oil were oversupply, sluggish demand and the strengthening of the dollar . Even a further drop in the number of drilling rigs in the US could not improve the situation, as it has not yet led to a significant decrease in oil production. Pressure on oil was also exerted by the position of OPEC, which is to fight for market share with countries that are not members of the cartel.


As for gold, the main factors in the decline in prices were expectations of an increase in interest rates by the fed and the strengthening of the us currency. It is worth emphasizing that an increase in rates is likely to cause a strengthening of the dollar, which is unfavorable for gold. In addition, this metal does not generate interest, and it is harder to compete with other assets that generate income when rates rise. As for the Outlook, analysts expect a possible price increase, as investors betting on lower prices are likely to close their positions.

In December, the main attention of market participants will be focused on the meetings of the ECB and the fed. The meeting of the European Central Bank is scheduled for December 3, and the results of the fed meeting will be announced on December 16, along with the publication of economic forecasts and a press conference of the Chairman.

ECB leaders are expected to start a new stage of stimulus. The latest survey of more than 50 economists, conducted by Reuters, showed that the probability that the ECB will change policy in December is 80%. Most economists expect the ECB to increase the size of its asset purchase program by $ 15 billion. up to 75 billion euros Euro per month. and / or extend the duration of the program. It is also predicted that the refinancing rate will remain at 0.05%, and the Deposit rate will be reduced by 10 basis points to -0.30%. Sources also report that the Central Bank is discussing the possibility of introducing a two-stage Commission for banks that store their cash in the ECB, and buying regional or even distressed debt.

The fed meeting is likely to end with an interest rate hike. According to the CME Group, the probability of a rate increase in December is currently estimated at 78 percent. In the near future, this indicator may be affected by the statements of the head of the Federal reserve Yellen and data on the number of jobs outside of agriculture for November, which will be released on December 4. According to forecasts, the number of jobs increased by 200 thousand against +271 thousand in October. Analysts note that the employment report should be very weak to change the fed's mood, but given recent indicators, the probability of such a development is quite low.

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