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ECB Monthly Report: Economic activity in the Eurozone to recover in mid-2013

March's ECB Monthly Report includes information on the latest ECB meeting during which the Governing Council decided to leave the rates unchanged at 0.75%.

The Council pointed out that inflation dropped below 2% in February, as expected, and that inflationary pressures should remain contained in the foreseeable future. It explained that “medium to longer-term inflation expectations for the euro area remain firmly anchored in line with the Governing Council’s aim of maintaining inflation rates below, but close to, 2%”, thus the monetary policy stance will continue to be accomodative. ECB's March Eurozone HICP forecast remained broadly unchanged, compared with the December projections: between +1.2% and +2.0% in 2013 and between +0.6% and +2.0% in 2014.

As for GDP, the report states that in the fourth quarter of 2012 and in the first quarter of 2013 economic activity in the Eurozone still revealed weakness. Nevertheless, as exports are being boosted by an increase in global demand and domestic demand is being supported by the accomodative monetary policy, recovery should start in mid-2013. For this year, the ECB staff sees GDP in a range between -0.9% and -0.1%, while for 2014 remaining flat or growing up to 2%

Regarding the Early LTRO repayments (so far €224.8 billion of the €1,018.7 billion have been repaid) the Governing Council pointed out that they are evidence of an improvement of investor confidence and of receding financial market fragmentation.

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The USD/JPY bolted higher Thursday, cruising to a session high of 96.54 in recent minutes during European trading. As risk appetite grows, the JPY becomes ever more dissatisfying, and the upside for the pair has been palpable recently. However, the cross has eased slightly in these moments, and while still steadfastly operating at +0.36% above its opening, the pair is installed at 96.44/43.
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