On the foreign exchange market, the dollar index ended the day stable at 97.01 points (-0.04%), while the euro pegged 0.04% to $1.1265 before the meeting of the ECB scheduled Wednesday. If there is no change on key rates, investors hope that Mario Draghi, the President of the ECB will give details on its project for loans at very low rates to European banks.
The pound stabilized at $1.3056 (-0.04%) in the hope of a further delay of Brexit. Theresa May met on Tuesday Angela Merkel and Emmanuel Macron to request a new postponement of the divorce until June 30. An extraordinary European summit will be held this Wednesday to decide on the issue. In case of refusal of a new postponement, the United Kingdom will leave the EU without agreement as of Friday, April 12.
Since the start of the year, investors have continued to sell the euro or take advantage of any rebound to bring down the single currency. In the run-up to the ECB meeting on Wednesday, some were adjusting their positions amid hopes that the central bank will recognize the recent improvement in activity in the service sector and retail sales.
But the ECB continues to face multiple factors limiting their enthusiasm: Italy on the verge of recession, Brexit, the never-ending Sino-US trade negotiations, sluggish global growth and low inflation.
Added to this are the new trade tensions between Washington and Brussels, with US President Donald Trump threatening the European Union with new customs duties if it does not put an end to subsidies to Airbus.
The prospect of lower rates reduces the attractiveness of the dollar for currency traders because it makes them less profitable. In the US bond markets, the yield of the benchmark US government bond, the 10-year T-Bond fell by 3 basis points to 2.50% after the IMF’s new global growth forecast. The international monetary fund expects only 3.3% growth this year in the world, against 3.5% in January, 3.7% in October 2018 and 3.9% in spring 2018! World GDP is expected to rebound in 2020 to return to a rate of 3.6% (unchanged forecast) according to the institution, which however cites many dangers and hints at “delicate moment” for the global economy.