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ECB gets serious

Published Friday, June 6th, 2014

The threat of falling consumer prices was made all too clear after the ECB launched an unprecedented round of measures to boost the region’s waning economic recovery and combat persistent deflationary pressures. In a move which exceeded market expectations, Mario Draghi cut interest rates to record lows and became the first major central banker to introduce negative deposit rates. The package also included up to €400 billion of cheap loans made available to banks which is hoped will encourage lending to businesses across the Eurozone.

The radical moves initiated by the ECB combined with signals that it was prepared to take further action if necessary buoyed risk appetite and triggered a rally in global stocks. Eurozone borrowing costs fell with the yield spread between core and periphery countries slipping to multi-year lows.

Focus will now turn to the US where the latest non-farm payroll data is forecast to have shown 218,000 net jobs added in May. Although this represents a slowdown from the previous month, a number in excess of 200,000 will confirm that the economy continues to expand at a healthy pace. Figures showing a rise in new claims for unemployment benefits will do little to dent the belief of an underlying improvement in the US labour market.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.