ECB to maintain wait-and-see approach, policy rates likely to remain on hold in 2019

The European Central Bank is set to meet later today to discuss monetary policy and the ailing euro area economy. The real GDP growth came in slightly stronger in the first quarter, but it still recorded a weak 1.2 percent growth on a year-on-year basis. So far, the data released in second quarter imply that the economy is continuing to tread water around this pace, noted Wells Fargo in a research report. The Markit Eurozon composite PMI came in at 51.8 in May, whereas the manufacturing PMI index remained in contractionary territory.

The ECB will be announcing the parameters for its targeted longer-term refinancing operations (TLTROs); however, the central bank is expected to maintain its wait and see approach, according to Wells Fargo. The economy has not eased enough to warrant a full reversal into an easing cycle, but it remains a ways off from the first rate hike.

“Our expectation is for the ECB’s policy rates to remain on hold for the remainder of the year, but gradually exit negative territory in 2020”, added Wells Fargo.

At 06:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -16.3288 while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -132.516 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex