European data has been playing sweet violin since the ECB has announced their QE program and Mr Draghi must be be delighted that he can finally see some light at the end of the tunnel. So, in short, grass is becoming greener, and the ECB’s big bazooka is finally going to bring some fruitful results. Therefore, the European central bank’s meeting which is going to take place in sunny Cyrpus, will mainly focus towards the economic data and odds are in favour of the monetary policy to stay pat.
Mr Draghi will walk with inflated chest as the economic conditions are brightening up and will probably say that the governing council now need to see the fruit of its labour before they take any hasty decision. Evidence of the ECB’s upcoming QE will work, is reflected in the economic data which are IFO, PMI, ZEW. The GDP growth, unemployment data all painting rosy picture of the Eurozone’s growth. The M3 money supply which is a measure of money supply, has also ticked up to 3.6% which is encouraging the fact that they ECB’s QE will stimulate further lending. This makes the base for the overall lending which is becoming sturdy. The figure for household lending soared by 0.9% y/y when adjusted for sales and securitisation.
According to business survey, the growth forecast for this year is also promising and reflecting that the economy may inflate a little more during this quarter when compared to the previous period. The previous number was at 0.3%
The final piece of the puzzle will be Greece which obviously loves staying in the headlines. Although the country has established a four month extension on its loan by promising they will implement reforms, but still there has been a very little or no progress to date. Greece may run out of money if it does not receive 7.2 billion euro by the end of March and German finance minister along with other officials have drum once again the condition of release of these funds which putting the reform plan into action.
Besides all that, given the country has successfully muddle through the toughest round of negotiations and obtained another four months therefore, the ECB may perhaps look to restore the waiver for Greece under which the county can use its sovereign debt as collateral. This will not only lower the soaring borrowing cost for banks and emergency liquidity assistance cost, but will also produce waves of headlines.
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