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Will the ECB take the first steps towards normalising monetary policy today?

business-articlesWill the ECB take the first steps towards normalising monetary policy today?
  • ECB to begin discussions on timetable for winding down QE
  • Slowing UK retail sales may weigh on GBP
  • US retail figures expected to be more positive
EUR investors await key ECB Meeting

The conclusion of the European Central Bank’s June policy meeting is likely to dominate currency markets today, with the focus unsurprisingly being on how it will impact the euro.

While the ECB still looks to be a long way off its next rate hike, this month’s meeting could prompt significant movement in EUR as the bank is expected to turn its attention towards its substantial quantitative easing programme.

This follows hawkish remarks from ECB Chief Economist, Peter Praet, during last week’s session in which he suggested policymakers would begin discussing the timetable for exiting its stimulus programme this month.

Many investors have interpreted this as a signal that the ECB could wind down its bond purchases by the end of 2018, putting the bank on the first step to ending its ultra-loose monetary policy.

GBP poised to slide as UK retail sales slow

The pound meanwhile is expected to trend lower again on Thursday as the UK publishes its latest retail sales figures.

Economists forecast today’s data will reveal UK retail sales were notably more sluggish last month, with sales growth expected to have slowed from 1.6% to 0.5%.

The slowdown in sales is expected to come as UK retail activity begins to normalise following the sharp rise in April as consumers returned to the high street en masse in the wake of disruption caused by the adverse weather in March.

US retail sales to lift USD?

The UK won’t be the only market assessing domestic retail activity today as the US also gears up to release its own retail sales figures later this afternoon.

Unlike the UK data however, the US sales figures are likely to prove supportive of the US dollar during today’s session as economists predict a modest rise in sales growth in May.

While analysts are only anticipating a small uptick in growth, rising from 0.2% to 0.4%, it will likely be enough to convince investors that the US economy continues to pick up steam in the second quarter.

Upcoming Data

09:30                     GBP Retail Sales
13:30                     EUR ECB Rate Decision
13:30                     USD Retail Sales   
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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