ECB confirmed market expectations

As the date of the key US Federal Reserve meeting approached, there was another unpleasant surprise from the Department of Labor, indicating a slowdown in inflation in the country. Export prices declined in November by 0.9%, import prices by 1.6%, both indicators turned out to be noticeably worse than forecasts. On an annualized basis, export and import prices slowed down from 3.1% to 1.8%, respectively, and from 0.5% to -1.6%, both indicators are noticeably worse than experts' forecasts.

The dynamics of import and export prices completely repeats the dynamics of consumer inflation, and in the conditions of worsening trade balance, this will lead to a decrease in budget revenues.


Today, a report on retail sales in November will be published, and in the flesh until the date of the Fed meeting will not receive any new information on price dynamics. Despite the fact that the root value of consumer inflation is still kept at a high level and gives the Fed the right to raise rates in December, all other price markers indicate a strong slowdown in price growth.

The latest data is not on the side of the dollar, because they increase the likelihood of the Fed revising forecasts to the downside.


The results of the ECB meeting on Thursday turned out to be expected, did not lead to an increase in the volatility of the euro. All key rates remain unchanged and will remain at current levels at least until the end of the summer, net purchases of assets will be terminated by the end of December, all of these markets before the meeting were regarded as the most likely result.

The ECB defined the risks for growth prospects in the Eurozone as "widely balanced", but acknowledged that the balance of risks is shifting to the downside due to persistent geopolitical uncertainty, protectionism, weakening developing countries and increased volatility in financial markets.

As for the economic forecasts, they were slightly revised, and this is probably the only thing that surprised the players, since the key indicators of economic growth are clearly unconvincing.


The program of reinvesting payments from the redemption of securities held on the ECB balance sheet will be continued in full, this step was also calculated in advance as necessary to maintain the flow of liquidity and contain the euro. Procurement in the public sector will be increased, that is, the ECB will remain a major buyer in the bond market.

The currency pair EUR / USD still has no reason to leave the range of 1.1325 - 1.1415 and will wait for the publication of data on inflation on Monday, December 17.

Great Britain

The outcome of the one-day EU summit for London turned out to be disappointing. The European Union will prepare for the UK exit regardless of whether an agreement is approved or not, and does not intend to start new negotiations.

Theresa May, not receiving any concessions from the EU, left the summit without comment. The pound did not respond to the summit results either, since the players did not hear anything new.

Despite the fact that GBP / USD is stable for the second day, there are no reasons to wait for growth above 1.2670, most likely a drift to a minimum of 1.2480 with a subsequent attempt to leave lower.


Today, the Bank of Russia will hold a regular monetary policy meeting. Markets assess the likelihood of raising the key rate as quite serious, explaining such a move both by rising inflation expectations and by the threat of the introduction of another package of restrictive measures from a number of western countries.

At the same time, no accurate forecasts can be made, since representatives of the Bank of Russia did not give any comments or hints about a possible change in monetary policy. The stability of the ruble exchange rate suggests that players in general are waiting for a balanced decision, for example, the Central Bank can announce simultaneously raising the rate by 0.25% and resuming currency purchases for the Ministry of Finance, which will keep the ruble close to current levels.

The dynamics of the ruble exchange rate will be determined by the outcome of the meeting of the CBR, depending on whether it is soft or hard, the USDRUB can move either to support 64.60 or to resistance 68.20.

The material has been provided by InstaForex Company -