The European Central Bank has a monetary policy announcement on Thursday, and many investors are wondering if the euro will fall to the same fate as the Canadian and Australian dollars. Both currencies were sold after the rate announcements despite a tinge of optimism from their central banks. So far, the ECB has been one of the most dovish central banks. Back in July when it last met, it promised to keep rates low for longer amidst weak inflation and concerns about the COVID-19 Delta variant.
Seven weeks later, inflation is at a 10-year high. The Delta variant is wreaking havoc across the globe, leading to tightened restrictions and worries about more cases in the fall. Yet, Europe is doing a much better job controlling the spread than other countries. Cases in Germany have been on the rise, but new infections in France, Italy and Spain have been trending lower this summer.
On inflation alone, the ECB should begin reducing asset purchases, but many central banks have taken a pause in recent weeks. Most policy-makers are optimistic and believe that the recovery will continue, but they also see the increase in inflation as transitory. Add virus uncertainty to the mix and they’ve been in no rush to take away the punch bowl.
Need Your Help Today. Your $1 can change life.