ECB Interest Rate decision Non-Event
The awaited ECB decision and Mario Draghi’s following statement today create a non-event as rates rose to 1.273 before dropping back down into the 1.26’s. Most interesting from Britain’s perspective Mario Draghi, the European Central Bank President suggested the UK leaving the EU wouldn’t make any difference to the region’s economic recovery. All of the fiscal measures introduced at the start of last month maintained the same with Quantitative Easing bond purchases due to start in June.
Germany unimpressed with ECB and Draghi
German Finance Minister Wolfgang Schaeuble has been heavily critical of the ECB’s spending policy and of Draghi himself. Schaeuble suggested that the ECB had an “ultra-loose monetary policy” which was essentially delivering low savings in Germany. Furthermore the Minister went on to suggest that half of the support for the right wing Alternative for Germany party could be credited to ECB policies. Mario Draghi batted of these claims by making it clear that the ECB is mandated to achieve a certain level for the whole Eurozone and not just individual nations. What this does show is that it’s becoming clear that the weaker economies such as Greece and Italy are essentially slowing down the growth of Germany. Whilst this is almost an obvious problem given the conditions in these nations, the voting public in Germany are slowly becoming discontent, especially when their pensions are getting stagnant.
Where to next in the coming weeks
Over the next few weeks there will be plenty of toing and froing between the Brexit campaigns. It would however appear that the Remain campaign has laid its stool out based on economic destruction if the UK were to leave. It will be interesting in the coming weeks as the Leave campaign sets out its main points as to what the strategy will be. Michael Gove has already made it clear that a report similar to the Treasuries is not on the cards as they don’t have the funds or the resources. The referendum will cause rates to the problem however some have predicted that most of the volatility has already happened. In the coming months it would not be surprising to see Sterling lose at least 5% against most major currencies.