ECB press conference impact on bonds

Yesterday, short-dated Eurozone benchmark bonds sold off the most as ECB President Jean-Claude Trichet was very hawkish in his introductory statement at the press conference. The ECB kept interest rates unchanged at 1% as widely expected. However, Trichet mentioned that the governing council will display strong vigilance and may even raise rates at the next meeting in April given the upside risks to inflation. Furthermore, the ECB is expected to increase the key ECB rate to 2% on a 12-month horizon. Today, the prime focus will be on labor market data in the USA. According to the consensus expectation compiled by Bloomberg, an increase of about +200K is seen for the nonfarm payrolls reading. Furthermore, the US factory orders reading is also expected to improve further.

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