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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

ECB paves way to tapering stimulus plan after leaving rates on hold - as it happened

Watch Mario Draghi’s press conference here

And that’s a good moment to stop. Thanks for reading and commenting. GW

It’s always interesting to see which press conference clips the ECB choose to plug over twitter....

How longer might the eurozone experience record low interest rates, currently set at zero percent?

Lena Komileva of G+ Economics reckons they could last for at least another year, and possible rather longer.

She writes:

The ECB kept its forward guidance on interest rates and asset purchases, namely that interest rates are expected to remain at their “present levels for an extended period of time, and well past the horizon of our net asset purchases” and that “we stand ready to increase our asset purchase programme in terms of size and/or duration”.

With no changes to the ECB’s policy sequencing (QE vs rates) under discussion, the guidance now means that rates will not be raised until after the end of asset purchases, which is likely to be late 2018 or early 2019 at the earliest.

European stock markets have ended the day higher.

The FTSE 100 gained 0.6%, or 42 points, at 7,398. Germany’s DAX gained 0.67%, while France’s CAC rose by 0.25%.

The euro is bobbing around the $1.20 mark too, up almost one euro cent today, following the news that the ECB has started discussing how to tackle its stimulus programme.

Joshua Mahony of IG says:

Draghi managed to keep the euro gains relatively contained today, with the talk of extremely accommodative policy dampening early gains for the single currency. With Draghi due to set out his stall for how the ECB will embark of its QE tapering in October, the big question is whether tapering will begin in 2017 or 2018.

Marilyn Watson, head of global fundamental fixed income strategy at BlackRock, predicts that the ECB will end its QE programme by next December.

Given the currency bloc’s improving fundamental backdrop and recent impressive data releases, particularly in Germany, not to mention the shortage of supply of bonds to buy, we believe that the ECB will fully taper its asset purchase programme by the end of 2018.

Adrian Hilton, head of global rates and currency at Columbia Threadneedle Investments, says Mario Draghi was more relaxed than some investors expected today:

At its present level, at least, he doesn’t seem to think the euro threatens the medium term inflation objective.”

“As it is, we think this leaves the ECB on track to taper its asset purchases from the start of next year, although we may have to wait until the October meeting – or maybe longer – to see the details. Were the euro to push on towards the 1.25 level versus the dollar, however, the bank may find itself trapped between a disinflationary exchange rate and a need to phase out its QE purchases before it runs out of bonds to buy.”

Mario Draghi’s comments about the euro are significant, says Ranko Berich, Head of Market Analysis at Monex Europe.

“Draghi acknowledged that the euro’s explosive strength this year is a source of uncertainty and worth monitoring.”

Snap summary: ECB plans stimulus decisions in October

Mario Draghi and vice-president Vitor Constancio arriving at today’s press conference.
Mario Draghi and vice-president Vitor Constancio arriving at today’s press conference. Photograph: Armando Babani/EPA

The key message from Mario Draghi’s press conference is that the ECB is getting ready to slow its stimulus programme, but it’s not in a rush.

President Draghi tried to be as vague as possible, while sticking to his pledge to decide the future of its bond-buying programme this autumn.

He confirmed that the governing council had begun ‘very preliminary’ talks about how the quantitative easing programme might be changed; how much longer it might run, and how much it might pump into the euro economy.

This was the key statement from the ECB chief:

“We will announce when we are ready. We think we are going to be ready for much of what we have to decide in October ... if we are not then we postpone.”

Traders have taken this as a sign that QE will be toned down from its current €60bn per month pace from January.

Crucially, Draghi didn’t seem too alarmed by the strength of the euro - claiming at one stage that he didn’t even know where the single currency was trading today (it peaked at $1.2059 during his press conference).

He also stated several times that interest rates will remain at their present record lows for a long time - that’s meant to reassure households and businesses.

Greek Prime Minister Alexis Tsipras, right, and French President Emmanuel Macron speaking today.
Greek Prime Minister Alexis Tsipras, right, and French President Emmanuel Macron speaking today. Photograph: Yorgos Karahalis/AP

Meanwhile in Athens, French president Emmanuel Macron has begun talks with Greek prime minister Alexis Tsipras.

In his first hour of official contact with Greece’s head of state, the French leader praised Athens’ austerity reforms and repeated calls for the indebted country to finally be given debt relief.

Meanwhile, anti-austerity groups, including breakaway militants from Tsipras’ Syriza party, have announced they will defy a ban on demonstrations and take to the streets in protest against the mass sell-off of state assets around which much of the visit will focus.

The far leftists, many members of the Popular Unity party, have called the ban - part of draconian security measures in the capital - an insult against “the democratic freedoms of the Greek people and first of all the right of peaceful protest.”

“Popular Unity will not be disciplined by government and police arbitrariness ... Greece is not for sale. Workers are not, and will not, become slaves.”

The demonstration will take place around 6pm local time - ahead of Macron outlining his vision for Europe in a speech from the ancient Pnyx.

Updated

Neil Wilson of ETX Capital has helpfully fired over this neat list of the key points from the ECB’s press conference:

  • ‘Bulk’ of QE decisions to be taken at October meeting
  • EZ growth stable and broad based - GDP outlook revised up to 2.2% in 2017, best growth since 2007
  • Medium-term inflation projections revised lower chiefly due to euro appreciation
  • Measures of underlying inflation have ticked up but remain at very subdued levels
  • Broad ‘dissatisfaction’ with inflation, but this is tempered by confidence that inflation will eventually converge with target
  • Most members reiterated worries about exchange rate pressures first raised by some policymakers at the last meeting
  • Appreciation of euro has ‘unquestionably’ led to tightening of financial conditions
  • ECB monitoring euro exchange rate, but doesn’t seem overly concerned about overshoot at present. (Could change if EURUSD hits $1.25?)
  • Interest rates will remain at present levels well past end of QE finishes; ECB still stands ready to increase the QE programme in terms of size and/or duration
  • No discussions on scarcity of bonds (seems unlikely), Draghi says ECB has repeatedly shown it can cope with scarcity issue
  • Draghi keen to stress that patience is needed, wont ‘experiment’ with interest rate forecasts
  • Draghi reiterated need for structural reforms to be substantially stepped up
  • ECB not resigned to permanently low inflation, expects convergence with target sooner or later
  • EURUSD rises above 1.20 handle to retest August’s 2 ½ year highs

Wilson adds:

“Mission largely accomplished: Mario Draghi successfully guided the market to expect a tapering announcement in October without sounding hawkish.

And finally, a question from a journalist from German newspaper Frankfurter Allgemeine Sonntagszeitung.

Q: Do you have any information about the negative side effects of the quantitative easing programme that you can share with us?

“The negative side effects of the quantitative easing programme” repeats Draghi slowly, perhaps aghast at the very suggestion that his precious scheme might not be an unmitigated triumph.

We simply don’t see any side-effects, he insists, and any potential side-effects are vastly overwhelmed by the positive effects of the bond-buying scheme.

And that’s the end of the press conference.

Updated

Q: What decisions do you think will be taken about your QE stimulus scheme in October?

We discussed a set of different scenarios today, Draghi replies.

They centred on the different lengths and sizes that the bond-buying programme could run at, and the ‘trade offs’ between those two factors.

In other words, the ECB is starting to talk about how much money it might want to pump into the economy from January 2017, and for how much longer it might be needed.

Q: Your inflation forecasts only run up until 2019, but what do you think will happen in 2020?

I expect we will meet all our targets in 2020, smiles Draghi - without mentioning that his term will have expired by then.

Asked about Emmanuel Macron’s economic plans, Draghi says France’s labor market reforms should aim at the “elimination of dualism”.

That’s the issue where new hires have weaker labour rights than long-serving workers, so they are laid off when a recession hits.

Q: Why is monetary policy so loose, when the economy is on track to grow much faster than in recent years?

Mario Draghi points to the “big labour market slack” to justify today’s record low interest rates.

He adds that the ECB doesn’t have a “dual mandate” like the Federal Reserve, so it can’t consider issues like unemployment. It just has to focus on price stability.

Q: What does Mr Draghi think of Estonia’s plans to launch its own state-backed cryptocurrency?

No eurozone country can launch its own currency, Draghi insists.

Q: Should we just accept that eurozone inflation won’t get back to the ECB’s target?

Not at all, Draghi replies. We just need ‘confidence, patience and persistence’ while the recovery in the economy feeds through to prices.

Now a question about the future of the eurozone.

Q: What powers should any future eurozone finance ministry have?

Member states have realised how incomplete our monetary union is, and how it made the eurozone crisis worse than it would have been

We should welcome that they’ve started this ‘complex’ discussion, says Draghi. We’re ready to help, but we’re not part of it.

Q: Are you concerned that the euro is trading above the levels at which your forecasts were drawn up ($1.18)?

I don’t know how much it’s trading, Draghi replies, before peeking at a note from his communications director, Christine Graeff....

... I’m told its $1.20, well OK, but I don’t comment on exchange rate levels anyway.

Updated

A journalist tries to lure the ECB president into commenting about the euro’s strength, by asking ‘professor Draghi’ to comment on when a strong currency becomes a problem.

I don’t comment on the exchange rate, Draghi replies firmly. I left university a long time ago, longer than I care to remember.

Updated

Draghi now denies that the eurozone is in a period of high uncertainty while the ECB plots its next move.

We’re simply discussing what to do next year, when our present programme expires, he adds.

ECB: We're ready for banks to move after Brexit

Q: What steps must the ECB take to ensure that banks who move from the City to the eurozone after Brexit are supervised properly, as such big banks bring big risks?

Draghi volleys this question to his deputy, Vítor Constâncio.

It’s very simple - we are prepared, Constâncio replies. The ECB already regulators large investment banks, so “no specific difficulties will come from this”.

Draghi: I'm not worried about bubbles

Q: Are you worried about bubbles in the financial markets? (an issue raised by Deutsche Bank’s John Cryan yesterday)

No, says Draghi.

He does single out the ‘prime commercial real estate’ market, saying valuations look stretched. But even here, there aren’t signs that leverage is increasing (higher leverage is a big warning sign that a bubble is forming, as shown in the 1929 crash).

Updated

Q: Do you take national government issues into account when deciding how and when to taper QE?

We act according to our mandate, Mario Draghi replies.

Q: So the German elections aren’t a factor?

No.

The euro has soared over $1.20, gaining more than 1.2 cents to $1.2040.

Speaking of batting balls away....

The bulk of our decisions about our asset purchase programme will be taken in October, Draghi says, in response to another question about QE.

Q: So will we get a full roadmap in October, saying how you might reduce the pace of the programme. Have you a personal preference?

I don’t, smiles Draghi, batting this ball safely away.

Q: And have you discussed the issue of bond scarcity?

No, says Draghi, We’ve shown we can cope with this issue successfully.

Draghi: We had 'very preliminary' talk about QE

Onto questions.

Q: Did you have any discussions about the future of QE today? And is the euro a problem at its current level?

Mario Draghi embarks on a long answer, which threatens to take up the entire press conference.

All members of the governing council spoke about three issues today, Draghi replies, growth, inflation and the exchange rate.

On growth, there was agreement that the economy was strengthening with six million new jobs created since the crisis. But there must be patience....

On inflation, there was a small downward revision ‘due to the exchange rate appreciation’. Draghi says there is “broad dissatisfaction’ with the inflation rate today.

On the exchange rate, although exports are doing well today the euro FX rate will “have consequences”.

So there were concerns expressed by a number of members about the euro, and discussion about whether its current value really reflected the strength of the eurozone economy

But the exchange rate is not a target, he says firmly (a familiar line from the Central Bankers’ handbook)

Draghi then circles back to the first question -- saying there was a “very preliminary” discussion about the bank’s asset purchase scheme, and the pros and cons of different scenarios.

We want to see the work from the committees who are tasked to work on this, he adds, before taking any decisions.

In conclusion, Draghi repeats the ECB’s pledge to leave interest rates at their present or lower rate for an extended period.

Putting on his serious voice, Draghi declares that the implementation of structural reforms needs to be stepped up. That’s a nudge to Europe’s politicians to do their bit.

ECB raises growth forecasts, trims inflation

Newsflash: The ECB has raised its growth forecast for 2017, and cut its inflation forecast in 2018 and 2019.

Updated

Draghi sound cautious on inflation, saying that ‘core inflation’ has yet to show a convincing pickup.

Headline inflation could turn negative towards the end of the year, he adds.

That could be a signal that the ECB is taking a dovish view, and will be reluctant to tighten monetary policy. But the euro is rising...to $1.1992 (up 0.7 of a cent today).

Boom! Draghi says that the ECB will decide on the “calibration” of its policy beyond 2017 later this year.

That confirms that the governing council hasn’t made a decision on how to taper its stimulus programme yet.

Despite the recovery, the eurozone still needs a “very substantial degree of monetary support”, Draghi continues.

Updated

Hello! Draghi says that ECB is watching the euro’s volatility carefully, as it is a source of uncertainty.

ECB president Mario Draghi begins his press conference by reading out today’s statement (details here).

He says that ECB’s outlook for the eurozone economy is “broadly unchanged”; a “broad-based” recovery is underway across all countries and sectors.

Watch Mario Draghi's press conference here

It’s Mario time....

Reuters correspondent Francesco Canepa reckons the strength of the euro deterred the ECB from tightening monetary policy today....

City traders will now be scrambling for a quick sandwich before the main event of the day, Mario Draghi’s press conference in 30 minutes

Although today’s statement was unchanged, Draghi could still surprise us when he’s asked about the ECB’s thinking around its stimulus programme.

Plus, we’ll get those new inflation and GDP forecasts.

Fred Ducrozet of Pictet bank suspects that Draghi will reveal that ECB staff are working on possible QE changes.

Kerim Derhalli, CEO and founder of investing app Invstr, says the ECB was right to leave interest rates on hold.

“The ECB is conscious of lagging inflation rates and will not want to see a further rise in the Euro for fear of stifling economic recovery, which is largely driven by Germany’s export performance”

Today’s statement from the European Central Bank may sound curiously familiar. But don’t worry, it’s not a case of deja vu.

The ECB has simply repeated July’s statement, while taking the time to tweak the date.

No change to the ECB's stimulus programme

It’s official, the European Central Bank has not made any changes to its stimulus programme.

Instead, it is maintaining its promise to buy €60bn of new bonds each month until at least the end of December 2017. And it also promises to boost the programme if needed, to keep inflation on track.

Here’s the key part of the statement:

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

The ECB also says that it expects to leave its interest rate at their present levels “for an extended period of time, and well past the horizon of the net asset purchases”.

That’s not a change of policy, though.

ECB leaves interest rates on hold

Breaking! The European Central Bank has left interest rates unchanged across the eurozone, at their current record lows.

That means the headline borrowing cost remains at 0.0%.

And banks will still be charged a negative interest rate, of minus 0.4%, when they leave money in the ECB’s electronic vaults. That is meant to encourage them to lend to consumers and businesses.

But what about QE?.....

European stock markets are still up, too:

With the ECB’s decision just moments away, the euro is up 0.5% against the US dollar at $1.1975.

Here’s a reminder of what the markets are looking for from the ECB today:

1) What’s the QE plan? Traders want to hear clues about how the ECB will handle its bond-buying programme beyond December. Currently it is buying €60bn of bonds per month; will we hear plans to taper it in January?

2) Will Draghi express any concern about the strong euro? Famously the exchange rate isn’t a formal target, but that might not prevent the ECB president pointing out that a higher exchange rate can push down inflation.

3) What are the new staff forecasts? ECB economists have been beavering away for weeks, drawing up new growth and inflation projections. They should influence (but not dictate) how the ECB plots its actions over the next few months.

4) Will it change its QE parameters? Put simply, the ECB is running out of bonds to buy, having energetically stimulating the eurozone economy since early 2015. A rule change could give it more leeway to buy debt from certain countries.

Tensions is mounting....

Market cheer US debt ceiling deal

European stock markets are pushing higher, with traders citing relief that America has avoided the danger of a default later this month.

Wall Street and the City have been cheered by the (rare) sight of Donald Trump clinching a deal with lawmakers on Capitol Hill, to extend the debt ceiling by three months.

Peter Rosenstreich of Swissquote bank says the deal may show that Trump can get things done after all:

The real news was Trump working with Democrats. In rare bipartisan deal, Trump, Republicans and Democrats extended the U.S. debt limit and provided government funding until Dec. 15th. Should the Republican-led Congress pass the bill, the 3-month deal would prevent an extraordinary default on U.S. government debt and keep the government funded for the fiscal year starting Oct. 1.

This was a massive first step. True, it was tied to relief assistance for victims of Hurricane Harvey, but still, the path towards meaningful tax reform (and potentially other stimulus) just got a little less steep. We were perhaps premature in writing off the Trump pro-growth, reflation story – a shift to the center, highlighted by this 3-month extension, could be the start of something real. A unified US government could have profound effects on our market outlook.

European stock markets this morning
European stock markets this morning Photograph: Thomson Reuters

Emmanuel Macron has touched down in Athens to begin his visit to the Greek capital...

Higher still and higher goes the euro....

That means there’s further to fall if the ECB fails to make any new decisions on its stimulus programme today.

Tight security as Macron visits Athens

Over in Athens, draconian security measures are being taken ahead of the French president Emmanuel Macron making his first official visit to the the country.

More than 2,000 police officers have been seconded around the city centre - including 700 special forces - as Greece prepares to lay out red carpet for the leader of the country that he stood by it throughout the euro zone crisis.

Helena Smith reports from Athens

The French president is due to arrive at Athens’ international airport, accompanied by his wife Brigitte, his economy and Europe ministers and the CEO’s of 40 investment-hungry French companies (from the French energy company Total to small independent start-ups) at 1:30pm local time.

A massive security operation, on a par with that put in place when the former US president Barack Obama visited the Greek capital last November, has gone into action - with sirens going off in the Greek capital already.

The stepped up measures come as police hunt for the perpetrators of an attack on the French Institute last night.

Two men on a motorbike are believed to have thrown black pain at the building late around 10 PM - the second such attack in the last year.

The two-day visit is being seen as perhaps the most important trip by a foreign leader to Greece this year with government sources describing it as having huge symbolic capital for both countries. “The future of Europe, investment programs, the country’s debt load and how we can boost growth will all be on the table,” a government source told the Guardian.

Macron will become the first foreign leader to give an address from the ancient Pnyx - where Pericles made his famous funeral oration - this evening. The theme will be Europe and his vision for the continent.

Meanwhile the French leader has sent a message of support to the country ahead of the visit, in which he has spoken of the nation’s ability to exit its long-running debt crisis. Greece’s ejection from the euro zone was unthinkable, he told the leading Greek daily Kathimerini.

“A Greek exit would signal, sooner or later, the end of the euro ... the best way to avoid the exit of any member state is to draw up an ambitious plan.”

Updated

Here’s a chart showing the eurozone’s economic recovery:

UK confirmed as joint-slowest EU economy last quarter

New figures have confirmed that the eurozone economy grew by 0.6% in the second quarter of this year.

Britain and Portugal were the slowest members, with both economies growing by just 0.3% between April and June.

Other countries sparkled, though; the Czech Republic grew by a blistering 2.5% in the quarter, followed by Sweden with 1.7% growth.

Eurostat, which compiled the data, reports that household spending rose by 0.5% in the euro area, while investment (or ‘gross fixed capital formation’) rose by 0.9%.

Exports rose by 1.1% in the euro area, while imports increased by 0.9%.

Matt Simpson, senior market analyst at Faraday Research, warns that the euro could tumble if Mario Draghi is more cautious than expected today.

He writes:

We don’t expect Mario to come out swinging today, but it may only require a tweak of CPI projections, casual reference of a high Euro or hint that QE normalisation talks are underway which could whip markets into a frenzy.

If ECB were to downgrade economic projections, it would be in line with Draghi’s doubt that Europe’s reflationary run remains self-sustainable. Markets would likely take this as strong clue that QE normalisation is pushed well back into 2018 and Euro could find itself under remarkable pressure.”

ECB meeting: What the experts predict

Excitingly, there’s no clear consensus on what the European Central Bank will do at today’s meeting.

Several experts think the decision on its stimulus progamme could be delayed until October, while the ECB is also expected to raise its growth forecasts and cut its inflation ones.

Naeem Aslam of Think Markets expects Mario Draghi to confirm that the governing council discussed how to trim, or taper, its bond purchasing scheme.

We have less than four months left before the ECB asset purchase program ends, and the president of the ECB, Mario Draghi is reticent about the future path of the monetary policy. Month after month, the tapering process has been delayed while the recovery in the Eurozone has strengthened. The patient is not sick and there is no need for the lifeline....

Forget about pulling a rabbit out of the hat, when it comes to the ECB’s meeting on Thursday, I expect the statement to be immensely tailor-made. It is widely expected that the ECB would say that they have officially discussed the process of tapering in the light of their latest economic projections.

Bloomberg economist Maxime Sbaihi predicts that the ECB will delay the big decision on slowing its stimulus programme until next month.

Lee Wild, head of equity strategy at Interactive Investor, says the ECB could pull the trigger on QE today.

“ECB president Mario Draghi will give his most keenly awaited speech for a while this lunchtime as traders bet whether he’ll finally confirm plans to cool the central bank’s stimulus programme.

“With the eurozone economy growing consistently and inflation higher, there’s certainly a strong argument to reduce monthly bond-buying from the current €60 billion. However, with the euro still firmly above $1.19, there’s a strong feeling that Draghi will delay any decision until October at the earliest.”

Claus Vistesen of Pantheon Macroeconomics predicts that the ECB will cut its inflation forecasts -- which seems plausible, as the euro has strengthened since June.

Hussein Sayed, chief market strategist at FXTM, says the strengthening euro has complicated the ECB’s dilemma:

The crucial question facing the ECB is whether Mario Draghi will announce the date of cutting bond purchases. The decision to taper asset purchases was widely expected to occur in today’s meeting, after Mr. Draghi hinted on 20 July that the discussion on tapering assets should take place in Autumn. Since then, the Euro has appreciated by more than 4.8% against the dollar, but declined slightly after peaking at $1.2069.

Technically, the Autumn season starts towards the end of September, so even if Mr. Draghi decided to delay the announcement of tapering the asset purchase program, this wouldn’t affect his credibility. However, the day of the announcement isn’t the only key driver of the Euro’s direction; it’s the game plan going forward.

The euro is continuing to rise against the US dollar, as traders wonder whether the ECB will take a decision on tapering its stimulus programme today.

Surprise! British house prices rose by a positively perky 1.1% in August, according to the Halifax’s monthly survey.

That’s the highest reading in eight months.

However, prices are still only 0.1% higher over the last quarter as a whole, following a decline in June.

The annual rate (a better measure) came at +2.6%, compared to 2.1% a month ago. It touched 10% back in 2016, before tailing off recently.

Newsflash from Sweden: The Riksbank has left interest rates unchanged at their current record low of -0.5%.

European stock markets have opened a little higher, with the FTSE 100 gaining 11 points or 0.15%.

The euro is creeping higher in early trading, up 0.2% to $1.1935, as traders await news from the ECB.

This table from ING shows how the euro could react to today’s decisions.

The agenda: All eyes on the ECB

The skyscraper headquarters of the European Central Bank beside the River Main in Frankfurt, Germany.
The skyscraper headquarters of the European Central Bank beside the River Main in Frankfurt, Germany. Photograph: Bloomberg/Bloomberg via Getty Images

Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s a big day for the eurozone, as the European Central Bank meets to set monetary policy. Top of the agenda - how, and when, to end the stimulus programme that is pumping more than €2 trillion into the euro economy.

Back in July, ECB president Mario Draghi promised us a decision on its quantitative easing programme ‘in the fall, or in the autumn’. And with the nights drawing in, the issue needs to be tackled soon.

Currently, the ECB is committed to buying €60bn of government and corporate bonds each month with newly created money, until the end of 2017.

So economists and traders are eager to know what will happen when the clock ticks past midnight on December 31. It’s possible that the ECB will decide to trim the pace of the programme, perhaps to €40bn per month from January, in an attempt to wean the markets off its stimulus without causing a crash.

BUT... we might not get the big decision today. The ECB could defer the decision until its October meeting, leaving us in suspense for a few more weeks.

Draghi may also take the opportunity to talk about the strength of the euro, which hit an eight-year high against the pound last month.

Konstantinos Anthis in the ADS Securities research team reckons Draghi has three options.

The first is that the ECB will announce a full-scale tapering of their purchases by 50 billion which would give a massive push to the Euro that will rally towards $1.21 and also change its outlook to clearly positive.

The second option is that the ECB will announce a smaller scale reduction of their program - possibly by 20 billion or so - which would be positive for the single currency, and could send the euro above $1.20 but the mixed reaction from the market would mean that gains would be capped;

and finally the third possibility would be the ECB postpones the tapering for a month or more which would be clearly negative for the euro and would send it tumbling towards or even below $1.18.

So we can expect plenty of volatility when the ECB shows its hand.

There’s no chance that the governing council will raise interest rates from their current record lows, despite Deutsche Bank’s CEO calling for the end of ‘cheap money’ yesterday.

The ECB will also publish its new growth and inflation forecasts today, for the first time since June. There’s chatter that it could raise its growth predictions a little, but trim its inflation outlook.

The financial markets look calm this morning, with some relief that a short-term deal has been hammered out on the US debt ceiling <sound of can bouncing down the road>.

We also get a new survey of UK house prices this morning, which could show if the market is cooling.

Plus, updated eurozone growth figures which will probably confirm that the region expanded by a punchy 0.6% in the April to June quarter.

Here’s the agenda:

  • 8.30am BST: Halifax’s UK house price survey for August
  • 10am BST: Updated eurozone GDP figures for Q2 2017
  • 12.45pm BST: ECB interest rate decision
  • 1.30pm BST: ECB press conference

Updated

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