Weak industrial production for the Eurozone, but all eyes on ECB today
The data reminding us of the slowdown in the Eurozone is never far away, and this morning we got the release of the industrial production figures which saw a drop of 0.4% in July, more than the -0.1% expected. This fed into the year on year number which came in at -2.0% vs -1.3% expected, while the June figure was revised down to -2.4% to add to the weakness in the data.
Not that this is having any impact on the EUR at the present time, with traders awaiting the announcement at 12.45 London time, which will be followed up by the press conference at 13.30. The market is expecting a cut in the deposit rate, with the consensus looking for a modest 10bps, while some are looking for a move of 20bps as the ECB may look to try and get ahead of the weakness in the economy. This is proving to be no mean feat, and but their own admission, the prolonged downturn has caught policymakers by surprise.
While the rate cuts will be the current policy action initiated, the focus of today's results will be on discussions on fresh QE, while a tiered rates system will also be on the agenda, though the Dutch parliament has written to the governing council to express its opposition to such a move. Germany has also been vocal in its opposition to fresh QE, to the point that the government is considering fiscal measures, which some see as a trade-off on prompting the ECB to hold back on fresh asset buying.
EUR/USD has been moving higher in recent trade, and this is down to fears that the ECB may disappoint the doves this afternoon. The kneejerk reaction would, therefore, be a perceived push higher, which could test the upper 1.1000's again, though we have resistance in the 1.1050-60 standing in the way in the meantime.