Today, the ECB Governing Council and the US preliminary GDP figures are the focus of attention.

The dollar has been moving nervously up and down recently, but the direction has not been clear. It will be interesting to see if both events will trigger a revival of trendiness.

Regarding the ECB Council meeting, the market consensus is that the main policy rate will remain unchanged. The ECB has also maintained that its policy decisions “depend on the data” and will not provide clear ‘guidance’ on the future direction of policy. The trend of slowing inflation is clear and the focus is on the timing of the start of future interest rate cuts. Although there was a temporary increase in the short-term financial market’s expectation of the start of interest rate cuts in March, the current trend is predominantly to factor in the start of rate cuts in April.

ECB officials, especially hawkish members, complained that the discussion on the start of rate cuts was ‘premature’. However, ECB President Lagarde has recently suggested that interest rate cuts could start in the summer. Some are even suggesting June at the earliest. Gradually, the short-term financial markets and the ECB authorities are coming closer together in their outlook. This will be explored at the ECB President Lagarde’s press conference.

What about the preliminary US Q4 GDP figures? The market forecast is for an annualised growth rate of around 2.0% quarter-on-quarter. Growth is expected to slow down from the previous 4.9%. However, growth is continuing and recession warnings are far from over. There is a certain degree of market anticipation of an early interest rate cut in March, but with the US economy continuing to grow strongly, an early rate cut would be even more premature than in Europe. The timing of the rate cut is likely to attract interest, with reference to consumer spending and deflators.

In addition to the above-mentioned press conference by ECB President Lagarde, US Treasury Secretary Janet Yellen will hold a press conference on the US economy. The conference is likely to include US President Biden’s “Investing in the US” and “Modern Supply-Side Economics”.