Market Update

Similar to the Fed, the financial world has been keenly monitoring the trajectory of the ECB's monetary policy. This comes in the wake of several ECB policymakers hinting at a potential reduction in the ECB’s QE initiative.
Intriguingly, even though the ECB plans to cut down its bond purchases from €80bn monthly to around €60-70bn, Christine Lagarde, the ECB President, described this shift as a 'recalibration' instead of a taper.
While Christine Lagarde appears to be balancing between the conservative stance of some ECB members and the broader necessity to bolster the Eurozone's economy, the recent move is unmistakably a tapering.
Regardless of the terminology (be it recalibration or tapering), the core implication remains evident: the era of reduced Eurozone interest rates isn't winding up anytime soon. This reduction is merely akin to easing off a car's accelerator. It definitely doesn't signify a complete halt of QE (comparable to slamming the brakes), nor does it hint at a reversal of QE (equivalent to selling back previously acquired bonds).
In essence, the ECB remains committed to infusing vast sums into the Eurozone's economy; the only change is the slightly diminished rate.
A somewhat parallel scenario unfolded in the UK this week. The BoE's Chief, Andrew Bailey, hinted on Wednesday (8 September 2021) at a prospective tightening of monetary policies. However, data on Friday (10 September 2021) revealed a stagnation in the UK's economic rebound, attributed to ongoing supply chain issues and the Delta variant's surge.
We've consistently opined that a significant interest rate hike in the UK remains distant, and the latest data reinforces our belief.
In the upcoming week, our focus will be on the UK's employment stats, including the unemployment rate and weekly earnings. Additionally, we'll be observing CPI inflation figures from the US & UK; retail sales data from the US, UK, and China; and industrial production insights from the US, Eurozone, and China.
Other notable releases include the Empire State Manufacturing Survey and the University of Michigan's Consumer Sentiment Index.