As traders in Canada return to their desks afterMonday’s bank holiday, global equity markets are looking to build on yesterday’s gains as market sentiment is buoyed by comments from European Central Bank officials aimed at calming the bond market and depressing the recent bout of volatility. During a speech last night, the ECB’s Coeure volunteered that the central bank would be “frontloading” the purchases of euro-area assets over the next two months, before an expected low-liquidity environment in the summer. The plan to increase the pace of bond buying over the next two months has helped calm concerns in regards to the high levels of volatility recently experienced in the European bond markets, with the smoothing effect as a result of the overall liquidity environment aiming to help to depress yields across the zone in a more orderly fashion. In addition to the comments from Coeure, Noyer lent further support to fixed income markets, assuring participants that the ECB would be willing to continue asset purchases past September 2016 if required. Equity indices in Europe are firmly in the green midway through their session, the yield on the German 10-year Bund dropping to 0.585%, and the euro sinking lower against the greenback to flirt with the 100-day moving average.
Turning our attention to the UK, the pound is also lower against the big dollar this morning, which is a product of an overall environment that is conducive to USD strength along with the fact that inflation figures for the month of April came in softer than anticipated. The increase of 0.2% on a month-over-month basis in the CPI basket was half the increase that had been forecast by analysts, and pushed the year-over-year figure to -0.1%, the first time in negative territory since at least 1960. Though the disappointing inflation print is in-line with the dovish quarterly inflation report from last week, GBPUSD has accelerated its losses this morning, outpacing the euro decline to be the major laggard on the session.
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