Inflation in the Euro area forced the ECB to keep the stimulus volume unchanged, despite the steady growth of other macroeconomic indicators.
The main reason for concern this week are the weak levels of the wages. The economy demonstrates the best growth rates in a decade. But Draghi seems to remain unhinged about cutting ultra-soft policies, which is justified by the weak increase in consumer prices throughout the region. In May, the CPI of the Eurozone fell to 1.4% from 1.9% in April, and with even worse situations on the Oil market, the inflation forecast could fall significantly. Unemployment in May was at 9.3%, while wage growth resumed the decline that started in 2016, after a slight rise in Oil prices earlier this year, reaching 1.6%. Labour costs continued to increase steadily updating the historical records.
The European currency declines ahead of the ECB press conference, as it is expected that Draghi will lower the inflation forecasts leaving the region’s economic growth unchanged. The Euro Index fell by 0.19% reflecting the weakness of the common currency in this uncertainty.
The British currency has been growing on Thursday, as market expectations regarding the victory of the May party in the parliamentary elections remain very optimistic. Recent public opinion polls show that the Prime Minister has a chance to consolidate his position in the parliament, allowing her to freely promote her initiatives relative to the country’s withdrawal from the European Union. GBP/USD kept around 1.2950 at the time of writing, which is similar to the consolidation before the breakdown of the important psychological level 1.30 and the rise to the level of 1.31.
The decline in defensive assets also shows a stable situation in the stock markets for the EM, showing a lowered level of risk in market sentiments. Gold lost half a percentage point, as the market abandoned the idea of a breakthrough at a psychological high of $1,300, while Yen lost 0.3% despite the situation in the Middle East and the controversial testimony of FBI Director James Comey before the Congress.
The Oil prices resumed declines after a 5% drop on Wednesday, as the EIA reported an increase in the commercial inventories of the US, despite the expectations that they will decline. WTI lost half a percent, as the strengthening of the Middle East crisis jeopardises the OPEC deal.
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