The US CPI is hit hard. Draghi’s speech is igniting the market.
At 16:15 Beijing time on Wednesday, the European Central Bank (ECB) President Mario Draghi will deliver a speech in Frankfurt.
The European Central Bank kept the three major interest rates unchanged at the June 6 meeting. The European Central Bank said in its monetary policy statement that it expects to keep the current key interest rate unchanged until at least the first half of 2020.
Since April 2016, the European Central Bank has maintained the three major interest rates unchanged.
European Central Bank President Mario Draghi said at the press conference after the June meeting that core inflation will rise in the medium term, potential inflation will remain moderate; economic growth risks remain biased downward, but economic data is not bad, there is no deflation Possibility, still full of confidence in fundamentals.
Since Draghi’s speech at the time was not as prevalent as the market expected, his remarks once pushed the euro up.
However, there were media reports last weekend that the European Central Bank may consider cutting interest rates, and investors will be concerned about whether the wording of Draghi has changed.
Reuters quoted two sources on June 9 as saying that if the economic growth rate is weak, the ECB executives are open to interest rate cuts.
The source said that if the euro zone economy stagnates again after a 0.4% increase in the first quarter of this year, the ECB will likely cut interest rates.
Analysts said that if Draghi is a dove in today‘s speech, especially if he is also open to interest rate cuts, then the euro may be hit.
At 20:30 Beijing time on Wednesday, investors will usher in the US Consumer Price Index (CPI), which is the most important economic indicator in the day. The CPI is an inflation indicator closely watched by the Fed.
According to media surveys, the US CPI monthly rate is expected to increase by 0.1% in May, and the core CPI monthly rate is expected to increase by 0.2%. The US CPI annual rate is expected to increase by 1.9% in May, and the core CPI annual rate is expected to increase by 2.1%.
The last inflation report released by the US Department of Labor showed that the core CPI of the US that did not include food and energy rose by 0.1% in April from the previous month, which was less than expected, and was 2.1% higher than the same period last year, in line with expectations. In the United States, the overall CPI rose by 0.3% in April, up 2% from the same period of last year, and both were lower than expected.
US data released on Tuesday showed that the producer price index (PPI) rose by 0.1% in May, in line with expectations, the previous value increased by 0.2%; the US PPI annual rate increased by 1.8% in May, expected to increase by 2%, the previous value increased by 2.2% .
The measure of US core producer prices hit the slowest growth rate in more than a year, indicating that inflationary pressures remain sluggish and may strengthen calls for the Fed to cut interest rates.
After the release of weak US economic data, the market‘s expectation of the Fed‘s interest rate cut has recently increased. The US Department of Labor‘s May employment report showed that employment growth was only 75,000, far below expectations. At the same time, the growth rate of manufacturing activity slowed to the lowest level since October 2016.
Last week, several Fed officials hinted that measures will be taken to maintain the US economic expansion when necessary. These statements have strengthened the observers‘ expectations for a rate cut during the year.
St. Louis Fed President Brad said on Monday that the Fed may soon need to cut interest rates to boost inflation and resist the downside economic risks of escalating trade wars.
Brad‘s comments mark the first public announcement by the Fed officials that they need to cut interest rates since January, in response to the challenges of slowing overseas growth and escalating trade wars to the US economy. As a member of the Fed‘s most dovish, Brad has voting rights at the FOMC this year.
In his speech last week, Federal Reserve Chairman Powell hinted at opening an interest rate cut when necessary. Powell said on Tuesday that the Fed "is closely monitoring the impact of these developments on the US economic outlook, and we will continue to take appropriate actions to maintain economic growth."
New York Fed President Williams said on Thursday that the current low inflation is a more serious problem than inflation, and the Fed and the world‘s major central banks should reassess the monetary policy strategy, goals and implementation tools. Williams is a permanent member of the FOMC and is also the "third person" of the Federal Reserve.