ECB’s Nowotny’s Hint

This story is not really saying anything about the timing of when the ECB will raise its deposit rate from -.40% but it does confirm the story last week that it is being discussed and the ECB will take a different tact than the Fed. This is because much of the corporate financing in Europe takes place via the banks as opposed to the much wider reach of the US capital markets in financing US companies.

Here is the link to the story: https://global.handelsblatt.com/finance/austrian-ecb-council-member-rate-increase-could-be-on-the-way-728696

The German 2 yr note yield closed at -.79%, up 3 bps after the Dutch election results. Watch tomorrow morning for its response to the Nowotny comments.

Here is the intraday chart on the euro in response:

As I mentioned in this week’s Investment Ideas update: (for members only)

As I’m most worried about a rising trend in inflation and a Fed that will very gradually respond with hikes, I’m a seller of the dollar. With the ECB cutting QE in April, I’m a buyer of the euro (FXE). Mario Draghi last week was very dovish but is finally beginning to acknowledge that inflation trends are moving up, the downside risks are basically gone and there is now even a discussion about when negative rates will start going on.

Become a member or test the service out with a free trial today.