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All attention on the ECB- BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, reckons the relevance of today's ECB meeting.

Key Quotes

"Rising geopolitical tensions in focus at today’s ECB meeting The euro is continuing to weaken which will please the ECB ahead of their monetary policy meeting today as it is helping to deliver an easing in overall monetary conditions in the euro-zone. On a trade-weighted basis the euro has declined by almost 3% since its recent peak from March highlighting that the ECB has proved successful so far at lowering the euro. However, its decline has been modest with the trade-weighted index still around 2% above its long-term average."

"The ECB is expected to leave its monetary policy stance unchanged at today’s policy meeting and leave the door open to further unconventional easing measures if required. Since their last policy meeting the performance of economic growth and inflation have both been disappointing."

"The German economy appears likely to have stalled in Q2 although likely only temporarily, while the Italian economy contracted again by -0.2% in Q2 for the second consecutive quarter. The Italian economy is still struggling to escape prolonged recession."

"Real GDP has expanded only once in the last twelve quarters by just 0.1% in Q4 2013. Further evidence of disinflationary pressures were also evident in the latest euro-zone CPI report which revealed that the annual rate of headline inflation declined to a fresh low of 0.4% in July."

"Downside risks to growth in the euro-zone have also increased reflecting heightened geopolitical tensions linked to developments in the Ukraine. The US has joined NATO and Poland in warning about the heightened risk of Russia sending troops into Eastern Ukraine."

"NATO has stated that there’s a threat of Russian troops crossing the border under the “pretext” of a humanitarian or peacekeeping mission. The sanctions imposed by the EU and US on Russia have prompted retaliatory action."

"The Russian government announced yesterday on its website that it has ordered restrictions on food and agricultural imports for one year from countries that have imposed sanctions against Russia to “protect national interests”. President Putin has called on the government to boost domestic supplies with the help of producers and retailers to avoid fuelling food price inflation in Russia."

"Inflation is already elevated in Russia and has been rising recently undermining personal consumption growth. Selling pressures on the rouble and other regional currencies such the Polish zloty and Hungarian forint continue to build in the near-term."

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