Alea iacta est! The Central Banks have spoken, everything seems to indicate a confirmed change in the monetary policy cycle.
- ECB leaves rates unchanged and shows no mercy to the European economy: Overall, the paradox of yesterday’s ECB meeting is that, with Europe in a much weaker macroeconomic situation than the US, it showed no intention of planning a rate cut, as Jerome Powell suggested in the case of the US on Wednesday.
- Officially, the ECB made two key points yesterday. It insisted on its concerns about inflation and kept interest rates on hold for as long as necessary. The news that it intended to lower its balance sheet and get rid of the PEPP bonds—which provided emergency funding during the Covid era—was also unexpected.
- The present cycle of rate hikes has come to a stop with yesterday’s ECB meeting, which was also the first tentative step towards future greater dovishness. But it should also be evident after yesterday’s meeting that the conclusion of a hiking cycle does not automatically usher in a cutting cycle.
- The market response remains optimistic despite everything. The German Dax is at record highs and the EURUSD returned to areas above 1.10, where it met the 200 average on weekly candles and is currently making some pullbacks.
- On the other hand, today’s data shows PMIs for Europe, France, Germany and the EU below 50 and lower than expected. Exacerbating the perception of an economic recession in Europe. The exception is the UK, whose Composite and Services PMIs resist contraction and remain above 50.
- EEE.UU: We look forward to the US PMI today.
- China: China’s industrial production advanced by 6.6% year-on-year in November 2023, following a 4.6% gain in the previous month and beating market forecasts of 5.6%. It was the quickest rate of industrial production growth since February 2022, mostly due to quicker increases in manufacturing (6.7% vs 5.1%), utilities (9.9% vs 1.5%), and mining (3.9% versus 2.9% in October).