The European Central Bank would need the inflation outlook to worsen significantly for another rate cut, but pushing rates deeper into negative territory remains an option, Peter Praet, the bank's chief economist told a Spanish newspaper.
"Deploying negative rates again in the future would require a distinct worsening of the inflation outlook," Praet told Expansión in an interview. "I don’t think we’re going to see these conditions materialising in the near future."
"Since negative rates were introduced in 2014, they have been very effective," said Praet, who also sits on the ECB's executive board. "So far, the positive effect of an improvement in financial conditions outweighs any negative effects that may be associated with banks’ earnings capacity or other financial stability risks."
Commodities headed for biggest monthly jump since 2010
The greenback’s decline is proving a plus for commodities, which are poised for their best monthly gain since 2010. Crude has jumped 20 percent since the end of March, while gold and silver are at 15-month highs.
The Bloomberg Commodity Index, a measure of returns on 22 raw materials, rose 0.1 percent, extending this month’s gain to 7.7 percent. Oil is set for its best month in a year in New York, buoyed by data this week that showed U.S. output is at the lowest level since October 2014.
The yen strengthened against all 16 major peers for the second day in a row
The yen strengthened against all 16 major peers for the second day in a row, climbing as much as 1percent to 107.08 a dollar, the highest level since October 2014. It surged 4.1 percent this week as the BOJ defied economists’ expectations that stimulus would be stepped up. Governor Haruhiko Kuroda told reporters after the review that he wants to wait and see how the introduction of negative rates in January affects the economy.
“The BOJ seems to have descended into a haze of confusion,” said Richard Jerram, the chief economist at Bank of Singapore. “They mismanaged expectations running up to the meeting -- and that is clear from the market reaction.”
Oil’s wild ride set to continue after April’s big climb
Oil futures are poised to end April with a monthly gain of nearly 19%, but the ride hasn’t been a smooth one and likely won’t be in the weeks to come as traders continue to navigate conflicting clues on the outlook for crude.
A weaker U.S. dollar DXY, -0.41% also boosted risk-taking sentiment in commodities. As oil is traded in dollars, a weaker U.S. dollar means more affordable prices for traders holding different currencies.
Both WTI and Brent are likely to finish the month with gains of around 16% and 19%, respectively.
“There certainly seems to be a lot of factors pressing on oil prices, yet they keep finding new legs,” said Kevin Kerr, managing editor and executive publisher of Commodities Watch.
“On a fundamental basis, the lack of any type of real cut in production, and a seeming indefinite impasse within and out of [the Organization of the Petroleum Exporting Countries] would strongly point to lower prices,” said Kerr. But “technically, the charts remain bullish,” with a cap to the upside likely around $62 or $65.
Reference: Reuters, Bloomberg, MarketWatch
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