The ECB’s Economic Bulletin Failed to Weigh on the EUR in Spite of Negative Tone

There were no major stats from the Eurozone for the markets to consider today. While there were no stats, the ECB’s Economic Bulletin likely drew plenty of interest. While the FED has acknowledged that inflationary pressures are not transitory, the ECB has yet to follow suit. This is in spite of the Eurozone’s annual rate of inflation accelerating to 5.0% in December, according to prelim figures.

The ECB Economic Bulletin

Salient points from today’s Economic Bulletin included:

• Global economy remains on a recovery path, although persisting supply bottlenecks, rising commodity prices, and Omicron weigh on near-term growth prospects.
• Recent surveys suggest that growth momentum remained weak at the start of Q4.
• While the euro area economy continues to recover, growth is also moderating.
• Activity is expected to pick up strongly over the course of the year, however.
• Output should exceed pre-pandemic levels in Q1 of 2022.
• While supply chain bottlenecks persist, these should ease during 2022.

Growth

• Projections are for annual growth of 5.1% in 2021, 4.2% in 2022, 2.9% in 2023, and 1.6% in 2024. Compared with September forecasts, 2022 growth was revised down, while 2023 growth was upwardly revised.

Inflation

• Inflation will remain above 2% for most of 2022 and is expected to remain elevated in the near-term.
• The ECB expects energy prices to stabilize, consumption patterns to normalize, and price pressures stemming from global supply bottlenecks to subside this year.
• December annual inflation forecasts were 2.6% in 2021, 3.2% in 2022, and 1.8% in 2023 and 2024. These were materially higher than September projections.

Market Impact

Ahead of today’s stats, the EUR had fallen to a pre-stat and current day low $1.14358 before rising to a pre-stat and current day high $1.14784.

In response to today’s Economic Bulletin, the EUR rose to a post-stat high $1.14776 before falling to a post-stat low $1.14534.

At the time of writing, the EUR was up by 0.14% to $1.14585.

Next Up

U.S wholesale inflation and weekly jobless claims figures will be in focus. While these are key stats, an unexpected jump in jobless claims would test support for riskier assets.