OctaFX | OctaFX Forex Broker
Open trading account

Forex Flash: Reiterating the ECB’s focus – Goldman Sachs

FXstreet.com (Barcelona) - A benign inflation outlook and continued weakness of economic activity create a strong prima facie case for further monetary easing in the Euro area. According to the Economics Research Team at Goldman Sachs, “We continue to expect the ECB to keep its key policy rates on hold at the April Governing Council meeting next week.” The ECB has established a very easy monetary policy stance in the Euro area: market overnight rates are close to zero and the liquidity situation is ample. But, owing to impairments to monetary policy transmission stemming from the current fragmentation of European financial markets, this easy policy stance is not being passed through to the real economy in the periphery, where stimulus is most needed.

In the eyes of the ECB, cutting policy rates in this context is a largely futile exercise, since pass-through to the bank rates facing borrowers in the real economy is so modest. For the ECB, it is better to focus on promoting the reactivation and reintegration of peripheral credit markets, so as to re-establish monetary transmission. “Were markets to reactivate in this way, a large endogenous easing of financial conditions in the periphery would result, as bank credit creation resumed and bank-lending rates in Spain and Italy converged towards the much lower levels now seen only in Germany and France. Such endogenous easing would render policy rate cuts redundant.” they add.

Forex: USD/JPY holding steady around 94.15/20

The Japanese yen is closing the week with a firm tone against its American counterpart, coinciding at the same time with the end of the fiscal year in Japan, where historically the yen tends to appreciate...
Read more Previous

Forex: AUD/USD sideways trading at 1.0409/10

The AUD/USD has continued its sideways trading Friday, in a heavily muted session given the Easter holidays. Having moved little off its opening, the cross is now incurring a marginal loss of -0.01%, settling at 1.0409/10 in these moments.
Read more Next
Start livechat