The meeting of the central bankers of the eurozone at the meeting of the Board of Governors of the European Central Bank (ECB-European Central Bank) is currently taking place as a trip to Athens, Greece. The central bankers from the ECB, under the leadership of the President of the European Central Bank Mrs. Christine Lagarde, are acting in a situation where inflation in the Eurozone during the month of September of this year, 2023, fell from the August value of 5.2% to the current level of 4.3% year-on-year. According to analysts, this currency policy meeting of the ECB will probably leave interest rates unchanged, the outcome of the meeting will be announced on Thursday 26 October 2023 at 14:45 CET at a press conference.
Investors, traders and other participants in the financial markets are waiting for the final decision of the Governing Council of the European Central Bank (ECB) and in the meantime the exchange rate of the single European currency Euro (EUR) against the US Dollar (USD), as the world’s reserve currency, during the European morning of Wednesday 25.10 .2023 found the EUR strengthening against the USD in a trading trend. This most tradable currency pair EUR/USD was thus traded on 25/10/2023, at approximately 7:45 CET, at a mutual exchange rate of 1.0597 USD per EUR, with the daily strengthening of the EUR by + 0.09% against USD. This exchange rate was achieved in a situation where the exchange value of the USD as measured by the US Dollar Currency Index (DXY) experienced a decline in its value. Currently, on the indicated day and time, the value of this DXY index was 106.19 USD points, with a daily decrease of -0.08% of the point value according to this index, which compares the value of the USD with the other six major world currencies.
Since the last meeting of the Governing Council of the European Central Bank (ECB), at which only a small majority of the members of the Governing Council spoke in favor of raising interest rates, bond yields have risen substantially, which has caused some concern in Frankfurt (the headquarters of the ECB). The October 2023 meeting of the European Central Bank’s Governing Council is expected to keep interest rates unchanged at its meeting in Athens this week, according to economic correspondents linked to brokerage analysts and investment bank financial strategists. While inflationary pressures ease and the economic outlook worsens for the eurozone, i.e. for the already twenty countries that share the single European currency, the euro (EUR), the Governing Council of the ECB will insist on keeping rates high for a longer period of time, these experts say. Given the recent volatility in the bond market, talk of an early end to the quantitative tightening program may need to be put on hold, analysts added.
“Rising long-term interest rates depending on fundamentals and increased market volatility could thus be the main challenges for the ECB’s current policy and its efforts to avoid a recession,” said Anatoli Annenkov, chief European economist at Societe Generale. in the ECB’s preliminary report. Rising yields could also weigh on discussions about whether to speed up the reduction of the ECB’s balance sheet. “Higher global bond yields and wider spreads not only for Italy suggest to us that it could be destabilizing for the ECB to accelerate PEPP-related QT – or even discuss the matter in great detail at next week’s meeting,” said Reinhard Cluse. UBS in an email to CNBC. PEPP, or Pandemic Emergency Purchase Programme, is a flexible bond purchase program introduced during the coronavirus pandemic. “If markets calm down again in the coming weeks and months, we could still see a chance that the ECB could eventually move PEPP-QT forward by several quarters.” Like QT, the question of how long is “longer is longer” will be a big topic in Athens. In other words: when will they start cutting rates? “The Board of Governors will be careful not to make the wrong move towards reductions too soon. We expect the first cut in September next year 2024. The risk is shifting towards June 24,” Deutsche Bank chief economist Mark Wall said in a research note.