Undoubtedly, the most important event of the second week of September will be the European Central Bank's decision on interest rates. With the increasing pressure on monetary easing, the ECB will have the opportunity to set the direction for other central banks.
This week there will be the penultimate meeting of the European Central Bank with Mario Draghi as the president of this institution. The next ECB meeting for Draghi will take place on October 24th. In turn, from November, the head of the International Monetary Fund Christine Lagarde is to take over. Mario Draghi will be remembered as Super Mario, i.e. a person who has taken all possible measures to save the euro area, the euro and to support economic growth, lending, inflation, and governments, because it was during Draghi's term that we saw negative bond yields.
There are many indications that Mario Draghi will finish his job at the ECB, deepening negative interest rates to save inflation and the European economy. According to market consensus, we may see the deposit rate cut by 10 basis points from -0.4 to -0.5 percent on Thursday, September 12th. It is also possible to resume the asset purchase program. It seems that in anticipation of these actions the market has already started to lower yields on bonds in Europe, where even German Bunds (10-year bonds) set historical yield lows at the level of -0.74 percent.
By cutting interest rates and reintroducing QE, the European Central Bank may irritate Donald Trump, who complains about a strong dollar and the euro falling like a stone. As a result, US exports are becoming less competitive, which Trump dislikes, and the topic of tariffs has not yet been completed. The easing of monetary policy by the ECB may also put pressure on the US Federal Reserve, whose decision will be announced on September 18th. ECB decision on Thursday, September 12th at 13:45 and the press conference at 14:30.
In the context of possible lower interest rates in the euro area and high inflation in Poland, the decision of the Monetary Policy Council may also be interesting. On Wednesday, September 11th, the MPC will decide on interest rates in Poland. According to most interest rates may not change for now, but the discussion at the press conference should be interesting, because we have increasing negative real interest rates. Press conference after the MPC meeting on Wednesday, September 11th at 16:00.
Meanwhile, in the US data will be published, including on inflation and retail sales. With a strong labor market, rising wages and falling gas prices, US consumers should remain strong. Mood and confidence are at very high levels, which could support consumer spending. It is expected the core inflation at 2.3 percent in August and CPI inflation at 1.8 percent. These data will be published on Thursday, September 12th at 14:30.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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