Interpretation of European macro data on June 6: The ECB announced its interest rate decision.
The main refinancing rate of the ECB in the euro area as of June 6
Attention: ★★★★★
The ECB announced its interest rate decision and adjusted the benchmark interest rate in the euro area.
The main refinancing rate of the ECB in the euro area as of June 6 is the interest rate at which the ECB provides loans to commercial banks.
The ECB is expected to cut interest rates and trigger the possibility of quarterly interest rate cuts in Europe in the future (quarterly interest rate cuts are regular interest rate cuts based on quarterly cycles). The interest rate cut in the euro area will have an impact on the US economy and even the global economy.
The expected decline in the European refinancing rate will affect corporate financing, borrowing costs, and even capital flows in the euro area.
Data impact: Impact on risk markets ★★★★ Impact on global economy and US interest rates ★★★★★
Data credibility: ★★★★★
Data: Main refinancing operation rate: 4.5%, deposit facility rate: 4%, marginal lending facility rate: 4.75%
Note: Main refinancing operation rate, the interest rate at which the European Central Bank provides loans to commercial banks.
The deposit facility rate is the interest rate at which commercial banks deposit money overnight at the central bank.
The marginal lending variable rate, also known as the overnight rate, is the interest rate at which the central bank temporarily borrows overnight loans from commercial banks.
Announcement time: 20:15
Impact:
This time the market expects the European Central Bank to cut interest rates by 25 basis points, mainly in the financing rate, which will drop by 25 basis points from 4.5% to 4.25%.
The impact of the interest rate cut on the euro zone:
1. Reduce borrowing costs, including corporate financing and private borrowing.
2. Increase money supply and liquidity.
3. Stimulate economic growth. It is easier to do things with money in hand.
4. Inflationary pressure increases. Having money stimulates consumption, causing supply and demand tension, rising prices, and inflationary pressure.
5. The euro depreciates.
6. The stock market rises because companies get money and continue to expand, and bond prices will rise.
The impact of interest rate cuts on Asia (village and books):
The euro interest rate cut will indirectly lead to a comparative appreciation of the RMB and the yen, thereby leading to pressure for currency appreciation. To put it bluntly, the appreciation of the RMB compared to the euro is not conducive to the use rate of the RMB in the international status.
Capital inflows. Currently, the village has relatively large restrictions on external capital inflows, so there is no need to consider it for the time being. However, it may strengthen the village's long-term debt with domestic institutions in the periphery, resulting in an increase in the risk rate of long-term debt (price increase, short-term decline in yield).
For Japan, the Japanese yen is a safe haven, which may lead to the exchange of euros for yen, and then use the yen to buy many Japanese yen assets for risk hedging.
Trade. The interest rate cut in the euro zone will lead to a decline in the competitiveness of the village's export trade with Japan. At present, the village has a problem of overcapacity, and exports have deteriorated. This is a disguised increase in the ability to restrict.
Impact on the United States:
Euro capital flows into US dollar capital. To put it bluntly, the euro zone cuts interest rates, which is using the interest rate difference to provide liquidity to the US dollar. This action threatens the United States with invasive inflation, and the Federal Reserve happens to be good at using market expectations to control inflation.
The appreciation of the US dollar, the proportion of the euro in the basket of currencies of the US dollar is relatively high, and the depreciation of the euro will indirectly increase the appreciation of the US dollar. The US dollar, which has fallen recently due to speculation on the expectation of interest rate cuts, may be boosted again. Consolidate confidence in the US dollar.
The transfer of Euro capital into US dollar capital may cause the US stock market and bond market to rise again.
Export pressure has the least effect on the United States. The United States itself is a major importer, so short-term export pressure will not have too strong an impact. At the same time, increased export pressure will also make the materials exported by the United States more expensive, which is actually good for the US dollar from another perspective. Use less materials to exchange for more money.
The impact on the monetary policy of the FED (Federal Reserve) is actually the inflation problem I mentioned above. The invasive inflation brought about by the loose euro will bring more pressure to the US inflation control, so that the market expects that the Federal Reserve will consider the issue of interest rate cuts more quickly. (Personally, I think the Fed's expected control of inflation will continue)
Summary:
To put it bluntly, after the US dollar lured Japan to raise interest rates and Switzerland to cut interest rates, it forced the eurozone to cut interest rates again, which will once again provide strong liquidity for the US dollar, and the harvest will begin.
Don't say it's not forced by the United States. You must know that the eurozone economy is not low now, and the inflation pressure is not small. In addition, the internal hawkish remarks have raised various dangers of interest rate cuts, but the eurozone still chooses to cut interest rates. I don't believe this is an autonomous behavior.And in order to clear the obstacles, Biden is going to meet with French President Macron before the interest rate decision. Macron, as a representative who actively speaks out in the media, has been silent recently.
Basically, the eurozone interest rate cut tonight is a foregone conclusion. Let's see how the market reacts.
