Despite some Stability Still too Early for ECB to Raise Rates

Political uncertainty has begun to dissipate in the euro zone after the Dutch general election and, more recently, the first round of the French presidential race. However, European politics are still a concern and it is too early for the central bank to consider raising rates, analysts told CNBC.

“There is no denying that the French election result (with the tail risk of a 2nd round between Mélenchon and Le Pen now out of the window) has given renewed impetus to speculation that the ECB might dial back quantitative easing earlier than planned, or might hike rates sooner than markets had been pricing in,” Elwin de Groot, senior market economist at Rabobank told CNBC via email.

“Having said that, I believe it is still early days,” he added.

The European Central Bank is meeting Thursday but expectations are that it will not announce any policy changes. The first round of the French election is over but the country has yet to make a final decision between the centrist Emmanuel Macron and the far-right candidate Marine Le Pen.

“Even assuming Macron secures his victory in the second round, it is also important that he will garner sufficient support in parliament,” de Groot noted, in relation to the upcoming parliamentary vote.

Carsten Brzeski, chief economist at ING, said the ECB is “highly unlikely” to do anything in between the first and second rounds of the French election.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza