Market movers today
The ECB meeting will be the main event today, and we expect the ECB to ease policy. On Monday, the ECB president Mario Draghi told the European parliament that the current rate of inflation (0.8%) was "way below" the ECB's target and added that "we know that the longer inflation stays at the current level, the higher will be the risk that it will not go back to 2% in any reasonable time... in other words, the longer will be the risk that inflation expectations could be disanchored - and we don't want that". This is a clear signal that the ECB will act again and we believe it will start today by stopping the sterilisation of the SMP programme. During Q2 we believe it will also cut the deposit rate to negative. It could, however, also opt to cut the deposit rate already today. For more on ECB policy, see Euro inflation research No. 5: ECB will ease again... and again . The MPC meeting in the UK should be rather uneventful with no change in policy.
Ahead of the monetary policy announcements, we have German factory orders for January. This is a very volatile indicator and monthly changes should be taken with a large pinch of salt. German orders have developed in line with the rise seen in German business confidence showing continued strength in early 2014.
We do not expect any immediate action from Danmarks Nationalbank (DN) in the event that the ECB stops the sterilisation of the SMP programme.
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