During the last years we understood how huge is the impact of Central Banks decisions on the financial markets. What happened last week was only another proof of this statement. Indeed, after the ECB conference on Thursday in which Mario Draghi promised more action to face the risk of a long deflation, the yields of Eurozone government bond fell to a very low level. Investors just think that the program could last more and for this reason the European stock market went up on Friday.
However, FED and People’s Bank of China actions are determining different reactions in the market. On Friday 23 China’s Central Bank cut benchmark interest rates for the sixth time in the current year to support the Chinese economy which growth expectation is the slowest in 25 years. The main objectives of the action of the PBoC are the reductions of domestic interest rate and the injection of credit in the Chinese economy to let China to be the engine of growth for the global economy also in the future.
On the other side, Janet Yellen’s decision of raising or not the U.S. benchmark represent a crucial point for investors through which develop the investment decisions. Moreover, nowadays there is a real game of currency between FED and ECB. This game affects how euro trades against the dollar, a key factor for the decisions of financial investors.
The ECB will continue its quantitative easing program? When will the FED increase interest rates? And what about Chinese growth and PBoC actions? These are the main questions which are affecting the financial market worldwide. What investors are doing is trying to understand in which way Central Banks are going to operate, of course not an easy work.
Francesco Manzo
However, FED and People’s Bank of China actions are determining different reactions in the market. On Friday 23 China’s Central Bank cut benchmark interest rates for the sixth time in the current year to support the Chinese economy which growth expectation is the slowest in 25 years. The main objectives of the action of the PBoC are the reductions of domestic interest rate and the injection of credit in the Chinese economy to let China to be the engine of growth for the global economy also in the future.
On the other side, Janet Yellen’s decision of raising or not the U.S. benchmark represent a crucial point for investors through which develop the investment decisions. Moreover, nowadays there is a real game of currency between FED and ECB. This game affects how euro trades against the dollar, a key factor for the decisions of financial investors.
The ECB will continue its quantitative easing program? When will the FED increase interest rates? And what about Chinese growth and PBoC actions? These are the main questions which are affecting the financial market worldwide. What investors are doing is trying to understand in which way Central Banks are going to operate, of course not an easy work.
Francesco Manzo