ECB Decision Update –
The European Central Bank raised its key interest rates by 50 basis points yesterday, pressing on with its fight to tame inflation despite signs of stress in the financial system resulting from earlier rate hikes.
However, the bank dropped from its statement any reference to further interest rate hikes, a significant shift from its previous messaging. That comes in a week when global financial markets have been rattled by the collapse of three mid-sized U.S. banks, and by concerns for the viability of Swiss lender Credit Suisse (NYSE:CS), one of the world’s ‘systemically important’ banks.
Credit Suisse was handed a $54 billion lifeline and a vote of confidence by the Swiss National Bank overnight.
The interest rate on the ECB’s main refinancing operations will rise to 3.50%, while the deposit facility rate will rise to 3.0% and the marginal lending rate to 3.75%. The bank also said it will continue to reduce its balance at the current rate of around €15B a month.
Market Update –
Crude oil paused its fall yesterday, and was able to recover slightly. After dropping to near 15-month lows earlier in the session it settled with a gain of 2.35%, supported by reports that top producers Saudi Arabia and Russia met to discuss ways to enhance market stability.
Brent crude gained 1.23% to $75.19 a barrel. U.S. (WTI) was up 1.03%, at $68.92. MCX Crude oil recovered by 2.43% and settled at 5695.
Bullions and Base metals prices settled in red yesterday. In morning trade both metals recovered mildly after massive emergency funding for Credit Suisse from the Swiss central bank eased fears that economically damaging turmoil in the banking sector could spread.
From the currency front, dollar retreated by 0.22%, at 104.516 and the euro rose by 0.23% at 1.0600 after the European Central Bank raised interest rates as planned despite market chaos in recent days, in a sign the Federal Reserve also will raise rates next week as both stay on track to tame inflation.
Today, Economic Data and Events
Japan Data
At 10.0am- Tertiary Industry Activity m/m, previous was at -0.4%, forecast is at 0.5%.
Above data is expected to have a positive impact on Yen and bullions.
Eurozone
At 3.30pm- Final CPI y/y, previous was at 8.6%, forecast is slightly lower 8.5%.
At same time, Final Core CPI y/y, previous was at 5.6% forecast is unchanged at 5.6%.
Above inflation data may have a positive impact on Euro, based on forecast.
Canada
At 6.pm- Foreign Securities Purchases, previous was at 21.22B, forecast is at 14.25B
At 6.PM- IPPI m/m, previous was at 0.4%, forecast is at -0.3%.
At 6.pm– RMPI m/m, previous was at -0.1%, forecast is at -0.2%.
Above data could have a mixed impact on Base metals and dollar.
US
At 6.45pm- Capacity Utilization Rate, previous was at 78.3%, forecast is at 78.5%
At 6.45PM- Industrial Production m/m, previous was at 0.0%, forecast is 0.2%.
At 7.30pm– Prelim UoM Consumer Sentiment, previous was at 67.0, forecast is at 66.9.
At 7.30- CB Leading Index m/m, forecast is -0.3%, previous was at -0.3%.
Above data could have a positive impact on the dollar while negative for bullions.