ECB talk helps lift the EUR ahead of the U.S. session

LONDON (Apr 6) There has been a fair amount of ECB talk this morning and the subjects have ranged from the war to monetary policy. The most interesting comments came from ECB's Panetta the Italian representative. Panetta noted that the ECB would not hesitate to tighten policy if supply shocks feed into domestic inflation. He then continued to speak on inflation saying asking the ECB to bring down high inflation in the near term would be extremely costly.

It is clear that inflation has been a massive concern for the central bank. The ECB thought the rising costs would be transitory but that prediction was pre (Russia/Ukraine) war. Following the conflict, prices rose and more and more supply left the market. This has since left the ECB has been behind the curve compared to the like of the BoE and BoC. In terms of growth, Panetta noted Q/Q growth rates will be very low this year and war could bring them into negative territory.

There were also some comments from ECB's de Guindos who said speeding up the green transition is a key priority. This could be good for base metals and commodities as copper is a key component of building infrastructure to keep up with the green initiative.

When speaking about the war de Guindos said for the Euro Area, the financial stability impact has been so far relatively contained. Prior to that ECB's Lane said the ECB is ready to use a range of tools against fragmentation.

Leading into the U.S. session EUR/USD has bounced slightly. Overnight the price was heading towards the swing low on the daily chart but there has been some support at 1.0874. Later in the session, we could hear from the FOMC as the meeting minutes from the last Fed meeting are set to be released. Money markets are pricing in 225bps worth of hikes this year which is said to be the sharpest tightening in three decades.

KITCO