However, the focus of the session was on ECB interest rate decision and the following press conference. Draghi exhibited higher confidence that the ECB would reach its inflation target, yet was extremely cautious in signalling any policy changes ahead. His reluctance to call recent FX moves excessive was still what markets paid most attention to. Further confidence towards reaching the target, policy changes still remote The ECB continued to sound optimistic about the economy. The statement said the strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2%.
However, the inflation picture continues to be problematic for the ECB. Draghi again emphasized that the central bank needs to have sufficient assurance inflation is converging to the ECB’s target in the medium-term, before it changes policy. Such assurance is currently missing. Draghi said he found it very difficult to see a scenario, where the ECB would hike rates this year. He hinted he still did not expect net asset purchases to end abruptly after September. In other words, the more likely alternatives after September are a gradual tapering or another extension.
In the US session New Home Sales and Unemployment Claims figures were published. Sales of new single-family houses in December 2017 were at a seasonally adjusted annual rate of 625,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.3 percent below the revised November rate of 689,000, but is 14.1 percent above the December 2016 estimate of 548,000. An estimated 608,000 new homes were sold in 2017. This is 8.3 percent (±4.1 percent) above the 2016 figure of 561,000.
Separate report on Unemployment Claims showed that in the week ending January 20, the advance figure for seasonally adjusted initial claims was 233,000, an increase of 17,000 from the previous week's revised level. The previous week's level was revised down by 4,000 from 220,000 to 216,000. The 4-week moving average was 240,000, a decrease of 3,500 from the previous week's revised average. The previous week's average was revised down by 1,000 from 244,500 to 243,500.
There will be no major releases from Eurozone tomorrow. In the US session GDP and Durable Goods Orders figures will be published. Analysts predict 3.0% growth in GDP and 0.9% increase in Durable Goods Orders.
Figures to watch:
Advance GDP (Friday 14:30)
Durable Goods Orders (Friday 14:30)
