ECB Meeting Remain A Major Focus, Fed Came Up With Hawkish Tone

By Naeem Aslam
Think Markets

European and Asian markets have dropped as investors are cautious ahead of an important event of the day. Of course, the event is the European central bank’s meeting. Investors are somewhat nervous what the president of the European central bank would have to say. It is widely expected in the market that the European central bank would signal about ending their quantitative easing program. Investors are bracing for this news because if the ECB sound a little too hawkish, it could derail the confidence in the eurozone.

There has been a slowdown in the European economic data. Plenty of disappointing news in recent weeks and the slump in Euro-area industrial production should be a matter of concern for the ECB.  So far, the officials have shown their confidence towards the economic data and reiterated their commitment to initiate the process of a discussion this week on how to scale back monetary support.

Having said this, the ECB also has another problem to deal with which is Italy. The Italian debt is getting out of hand and the political situation over in Italy is delicate. But this does not mean that the ECB can keep the quantitative easing program running forever as the bank is already hitting its ceiling.

Over in the US, investors reacted adversly to the Fed Reserve’s monetary policy action. The Fed see another two rate hikes for this year and this creates a possibility that the Fed is taking things too far with their monetary policy. The Fed said that they are concerned about the economy may be overheating and they have to take appropriate action. Yes, the labour market is strong but there are other elements of the economic data which aren’t that strong. Jerome Powell said that the unemployment and inflation are both low. At the same time he did balance his statement by saying that the bank over-react to inflation.