Today’s ECB meeting will be the main attraction. We expect the ECB to deliver anaggressive easing move by cutting the refi and deposit rates, taking the latter intonegative territory. For more about the implications of negative rates and the Danishexperience, see here.
At the same time, we expect the ECB to boost liquidity through a new 3Y LTRO(perhaps with a fixed rate) and potentially introduce credit easing measures, see here.
The Bank of England meeting should be a non-event with unchanged policy.Attention has shifted towards when the members will start expressing personal viewsof when to start hiking the Bank Rate, but this will most likely first be seen in theminutes from the meetings (not released until 18 June).
German factory orders are due for release and we expect an increase in April aftertemporary factors contributed to a decline in March. Our expectation follows althoughGerman business indicators have softened a bit lately and we see downside risk to ourforecast as the strong euro could have dampened orders.
Euro retail sales in April could show a decline after increasing in each month in Q1,which is a bit unusual. On the other hand, consumer confidence has improvedconsiderably and points to higher private consumption.
Read the full report: FX Daily
Danske Bank