3 Jan 2014
More worrying contraction in Eurozone private lending
FXstreet.com (London) - The euro is under pressure after European Central Bank data showed that the collapse in Eurozone private sector lending continues.
This morning’s data release from the ECB showed that the November M3 measure of money supply met consensus expectations at +1.5 percent, up from the October tear-on-year increase of 1.4 percent.
However, the release also showed a contraction in private sector lending, down a further 2.3 percent, further than the consensus estimate of 2.2 percent and comes on top of the October year-on-year drop of 2.1 percent.
The accelerating contraction of private sector credit will not be welcome news for European policymakers, combined with anaemic Eurozone consumer price inflation of 0.9 percent. The weak private lending and inflation led the European Central Bank to cut its main refinancing rate by 25bps to 0.25 percent in an effort to stimulate lending activity.
Though the ECB has mooted negative interest rates, the prospect of sending out a message that the central bank is running out of monetary bullets has so far but the brakes on their implementation. However, the combination of weak inflation and a freezing private sector lending environment will continue to stifle European recovery.
EUR/USD is down 0.11 percent so far, falling from a morning high of USD1.3672. The pair is currently trading at USD1.3649 with little to check its run of play until the series of Fed speeches this afternoon.
This morning’s data release from the ECB showed that the November M3 measure of money supply met consensus expectations at +1.5 percent, up from the October tear-on-year increase of 1.4 percent.
However, the release also showed a contraction in private sector lending, down a further 2.3 percent, further than the consensus estimate of 2.2 percent and comes on top of the October year-on-year drop of 2.1 percent.
The accelerating contraction of private sector credit will not be welcome news for European policymakers, combined with anaemic Eurozone consumer price inflation of 0.9 percent. The weak private lending and inflation led the European Central Bank to cut its main refinancing rate by 25bps to 0.25 percent in an effort to stimulate lending activity.
Though the ECB has mooted negative interest rates, the prospect of sending out a message that the central bank is running out of monetary bullets has so far but the brakes on their implementation. However, the combination of weak inflation and a freezing private sector lending environment will continue to stifle European recovery.
EUR/USD is down 0.11 percent so far, falling from a morning high of USD1.3672. The pair is currently trading at USD1.3649 with little to check its run of play until the series of Fed speeches this afternoon.