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ECB holds firm

ECB holds firm

The ECB made no changes to monetary policy at the April meeting with the main refi rate held at 0.0% which was in line with consensus forecasts. As far as the economy is concerned, President Lagarde stated that downside risks to the economy have increased substantially while inflation risks were higher.

On a longer-term view, however, the bank expects inflation will gradually move back to target and possibly below.

Lagarde stated that the bank was sticking to its planned sequence and completing asset purchases first which is likely to be during the third quarter. She added that it would start raising rates some time afterward which could be a week or several months. In this context, the June meeting will be pivotal. If this sequencing remains in place, the bank could raise rates as early as July or delay this until much later in the year.

Sterling overall has been held in relatively tight ranges, especially with UK markets closed on Friday and Monday. Overall yield spreads remained a key element in global currency markets with the US dollar remaining under pressure against the dollar while the Euro remained under pressure.

Sterling did find support close to 1.3000 against the dollar while the Euro dipped below the 0.8300 level with lows around 0.8275 amid wider Euro losses.

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