ECB: Lagarde asked on what makes monpol less restrictive ahead
Q:" What makes you think the ECB think that the monetary policy stance is actually less restrictive, because it seems that companies are still holding back to actually borrow and invest.
A: "You know, our assessment based on the Bank Lending Survey, based on the numbers that we... receive, based on the corporate survey that that we hold, and comparing the current situation with the last few quarters and this month versus last month as well, indicate that lending is actually increasing. The lending to corporates is up by 2% the lending to households in terms of mortgages is up by 1.3% now this is not yet bringing us to, you know, the sort of strong, solid, robust levels of borrowing by economic actors, but it is definitely in on the way up. So you have two phenomenon. You have interest rates that we see going down, both for corporate and households, not phenomenally yet. We hope that that process will continue, and we are seeing, at the same time, the volume of lending going up as well. So that's on those two accounts, which it's one of the element that we use to determine whether or not and how much we are or not, still restrictive, and we're not really sort of passing judgement, because I think that particular point is not necessarily the most relevant. What we acknowledge is that it is becoming less meaningfully, less restrictive, and as I said, we take into account all the work that has been done, and we assess the process that we are in."
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EQUITIES: European Equities are extending gains
- Moves are very limited in US Equities, but the Cash Estoxx (SX5E) continues to close Monday's opening gap, which is situated at 5284.10, although this is not the best Technical study to use in these type of markets.
- The all time record high printed on Friday stands at 5314.29.
STIR: Effective Fed Funds Rate
- FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B
- Earlier Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.35% (-0.03), volume: $2.413T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $913B
- Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $890B
- (rate, volume levels reflect prior session)
FOREX: CADJPY Recovery Bolstered by Hold of Trendline Support
- Following in the footsteps of Mexico’s administration, Canadian PM Justin Trudeau announced an agreement with the US, circumventing the immediate implementation of 25% tariffs.
- CADJPY has moderately outperformed following the sharp CAD recovery from Monday’s lows, extending the bounce to 2.93% in recent trade, and up 0.68% during today’s session.
- The recovery has been bolstered by the cross holding trendline support on Monday, drawn from the 2020 lows. The trendline intersects close to the psychological 105.00 handle, which has proved pivotal on a closing basis over the last 18 months.
- An extension of strength today has narrowed the gap to both 20- and 50-day EMAs, currently intersecting at 108.13 and 108.52 respectively.
- ING believe markets are not fully pricing out the tariff threat just yet. Primarily because of the short delay, but also because headlines have provided a higher degree of uncertainty and unpredictability that harms high-beta currencies. This is due to direct protectionism exposures and due to risk sentiment implications.
- However, they highlight a cross like AUD/CAD should trade sharply lower given Canada has dodged tariffs and China has not, but it is only 0.5% lower on the day. That signals markets are pricing in a good chance that the US and China will also strike a deal and delay tariffs.
