Financial Times

Euro falls as ECB takes cautious approach to ending stimulus

by Michael Hunter and Alice Woodhouse, FT

June 14, 2018 | 5:19 pm
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The European Central Bank’s confirmation that it will end its bond-buying stimulus policy this year is setting the pace, with the euro falling as investors parse the detail within the statement.

The shared currency is down 1 per cent $1.1672 and a seven-session low — failing to hold highs that took it up as much as 0.5 per cent — as the cautious elements in the ECB’s approach dominate reaction. Dollar bulls are also taking encouragement from US retail sales data that came in significantly ahead of forecasts.

The yield on two-year German debt is ticking lower, by 1.6 basis points to minus 0.654 per cent as investors buy the debt. There is also demand for 10-year German Bunds, sending their yield down 2.1 bps to 0.454 per cent.

Stock markets are higher after the announcement, turning round from modest intraday declines.

The Federal Reserve lifted interest rates on Wednesday, and in its dot-plot projections, it signalled that two further increases were likely in 2018, making a total of four for the year, up from the previous projection of three.

The dollar index is up 0.3 per cent on the session, leaving it up over 2 per cent for 2018.

The Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points to 2 per cent, as expected.

It projected gross domestic product growth in 2018 of 2.8 per cent, up slightly from its March outlook of 2.7 per cent and said its preferred measure of inflation would reach 2.1 per cent this year against a March projection of 1.9 per cent.

New York’s the S&P 500 is up 0.3 per cent in early US trade, having slipped 0.4 per cent overnight.

Frankfurt’s Xetra Dax 30 is up 0.9 per cent, with the Cac 40 in Paris up 1 per cent. The Europe-wide Stoxx 600 is up 0.6 per cent. London’s FTSE 100 is 0.3 per cent weaker.

The Kospi index was among the biggest fallers, down 1.8 per cent.

Hong Kong’s Hang Seng fell 0.9 per cent after a run of economic data missed forecasts. Tokyo’s Topix dropped by the same margin with industrial and consumer stocks falling.

The dollar rally has taken the pound down 0.3 per cent to $1.3333, wiping out gains for the UK currency that came after UK retail sales data strongly beat forecasts for May.

The yen is 0.1 per cent stronger at ¥110.21.

Brent crude is off 0.4 per cent at $76.41 a barrel while US marker West Texas Intermediate is down 0.1 per cent at $66.58 a barrel. US crude inventories fell more than expected last week, according to the Energy Information Administration.

Gold was flat at $1,299 an ounce.

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by Michael Hunter and Alice Woodhouse, FT

June 14, 2018 | 5:19 pm
12893  |   93   |   0  |   Start Conversation

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