Currency Note Euro

Will the ECB cut interest rates today over worries about deflation

By Ricky Bean February 6th, 2014

The euro had a volatile day yesterday as its services purchasing managers’ index (PMI) figures came out shy of market estimates, whilst Januarys figures were also revised down. Retail sales figures were also particularly disappointing, showing that trade was down by 1.6% month on month.

The main announcement today will be the monthly European Central Bank (ECB) meeting. With deflation risk a severe ongoing concern in Europe, some analysts believe that the central bank will act at today’s meeting to try and boost liquidity. Speculation continues to mount that the ECB could potentially cut the refinancing rate further or even enforce negative deposit rates, which in theory would weaken the euro. Whether or not the ECB decides to alter monetary policy, the accompanying statement will be watched extremely closely as analysts try and second guess the central bank’s next move. Alongside this we will also see a French 10-year bond auction and German factory orders.

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