Increase In EU Trade Balances
Eurozone Trade Balance figures for the month of March have produced a moderate month on month increase. Seasonally Adjusted numbers have yielded a surplus of €17.1Bn, an improvement on the February figure of €13.6Bn and above the market anticipated figure of €15.5Bn. The Non Seasonally Adjusted numbers also provided an increase, February’s €13.9Bn turned into €15.2Bn, this was short of the expected surplus of €17.3Bn.
Markets were surprised by yesterday’s Eurozone growth update. The downward revision to 0.2% of the GDP figure for the final quarter of 2013 combined with a preliminary first quarter 2014 reading of also 0.2% caused disappointment among economists that had been anticipating a greater acceleration of recovery within the Eurozone.
The hint of an inflationary pick up from yesterday’s Consumer Price Index numbers will now not be enough to enable the European Central Bank (ECB) maintain it’s wait and see approach much longer. A package of monetary stimulus measures is being prepared for presentation at next months Governing Council meeting.
These stimulus measures are rumored to include cuts to the key ECB interest rates which could result in the Refinance Rate dropping to between 0% and 0.15% and the Overnight Deposit Rate falling to between -0.1% and -0.25%. Public bond buying by the Bank appears to have been put on the back burner for now as the ECB will initially attempt to use further rate cuts to spark both GDP and price growth within the Eurozone.
The prospect of definitive action from the ECB is being broadly welcomed by the markets, but many commentators are suggesting that the probable package announced will fall short of what is required. The danger is that if this slow and cautious approach by the authorities does not yield results soon then the Eurozone economy will slip back into recession and the monetary policy arsenal will have been exhausted.
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