While it may be a quiet day for macroeconomic data, it hasn’t been the case for the markets. Stocks fell sharply at the London open, before paring back their losses sharply, while gold has managed to hold onto its gains after its suspicious-looking drop on Monday.
Looks like the markets just about managed to avoid a mauling by the bears, who have now temporarily retreated to lick their wounds!
With strong words to support the Euro, Mario Draghi, the European Central Bank President, quelled fears over the future of the Eurozone. However, the bailout negotiations in Cyprus revealed cracks in this ‘floor’ supporting the region and markets. A ‘Banking Union’ has been undermined, imbalances within the region magnified and individual systematic risk returned.
Breaking News – Factory Orders
Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. While inflation rates are likely to stay above 2% for the remainder of 2012, over the policy-relevant horizon we expect price developments to remain in line with price stability. Consistent with this picture, the underlying pace of monetary expansion remains subdued. Inflation expectations for the euro area economy continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term
