· The euro fell sharply against the dollar Thursday after the European Central Bank (ECB) unveiled a series of market-friendly policies amid a slew of rising risks.
The euro zone's central bank slashed its growth forecast for 2019 to 1.1 percent from an earlier forecast of 1.7 percent made in December. ECB President Mario Draghi said Thursday that there had been a "sizable moderation in economic expansion that will extend into the current year."
"The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment," Draghi told reporters.
The 19-member region has been overshadowed by political developments in Italy, which entered a technical recession at the end of 2018; and in the U.K., where its departure from the EU has yet to be finalized. There are also concerns about a potential slowdown in the Chinese economy, given its reliance on exports to the country. Recent manufacturing data have also indicated weaker activity, especially in Germany — the traditional growth engine of the region.
· Given the worsening economic conditions, the ECB also lowered its inflation forecasts for 2019. Annual inflation is set to hit 1.2 percent this year. The December forecasts had pointed to a headline inflation target of 1.6 percent. The central bank is positive that its new set of measures will help bring inflation closer to its target of "close but below 2 percent."
· The ECB's interest rates remain at record lows and are set to remain at these levels at least until the end of the year. The central bank also announced a fresh set of loans to euro area banks on Thursday, aimed at boosting the real economy.
· The European Central Bank (ECB) announced another program to stimulate bank lending in the euro zone on Thursday, as well as pushing back the timing of its first rate hike.
"A new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, each with a maturity of two years," the central bank said in a statement.
The TLTROs are loans that the ECB provides at cheap rates to banks in the euro area. As a result, lenders are able to provide better credit conditions to customers, which in turn stimulates the real economy.
· The euro dipped below $1.13 on Thursday after the European Central Bank postponed the timing of its first post-crisis rate hike to 2020 at the earliest and launched a new round of cheap loans to banks.
The decision to tweak the bank's forward guidance on rates was a surprise for many investors, although the move in the euro was relatively small.
The euro struggled near a 21-month low against the dollar on Friday, hurt by a series of dovish signals from the European Central Bank, with the currency market bracing for further volatility ahead of U.S. jobs data later in the day.
The single currency stood little changed at $1.1197 having tumbled 1 percent on Thursday to touch $1.1176, its lowest since June 2017. It has declined 1.5 percent so far this week.
· Sterling dropped to $1.3091 as European Union and UK sources played down the chances of a breakthrough in talks over their Brexit withdrawal deal.
· The U.S. Federal Reserve should lower its expectations for rate hikes even if its economic forecasts have not changed, because of signs of a slowdown in spending and other risks, Governor Lael Brainard said on Thursday.
Brainard said she has seen both an increase in risks to the U.S. economy as well as signs in current data that businesses and consumers are spending less money, and that “the best way to safeguard the gains we have made on jobs and inflation is to navigate cautiously on rates.”
· Chinese telecommunications giant Huawei Technologies Co Ltd filed a lawsuit against the United States late Wednesday, alleging that it acted illegally by enacting a law that forbids the government from doing business with companies that use Huawei equipment as a “substantial or essential component” of their system.
The lawsuit was filed in the U.S. District Court for the Eastern District of Texas.
· Oil prices rose in choppy trade on Thursday, as the market continues to draw support from ongoing OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran.
However, gains were capped by record U.S. crude output and rising inventories and falling estimates of global economic growth. Crude futures briefly tumbled towards session lows in mid-morning trade, tracking a slump in equity marketsafter the European Central Bank cut its economic growth forecast for the continent.
U.S. West Texas Intermediate crude futures ended Thursday's session 44 cents higher at $56.66 per barrel, near the session peak at $56.99.
Brent crude futures were up 32 cents at $66.31 per barrel around 2:30 p.m. ET. The international benchmark for oil prices earlier rose as high as $67.
· The European Union will respond to further developments in Venezuela and the threat of further sanctions against socialist President Nicolas Maduro is still on the table, Germany’s foreign minister said on Thursday.
“The European Union will be able to monitor and respond to further developments,” Heiko Maas told ZDF broadcaster. “We already discussed at the last meeting of foreign ministers that the time can come when further sanctions from the European Union will come against the Maduro regime in Venezuela.”
· U.S. President Donald Trump is open to additional talks with Pyongyang over denuclearization, his national security adviser said on Thursday, despite reports that North Korea is reactivating parts of its missile program.
Reference: CNBC, Reuters
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