The Day at a Glance | Jul 19 2022

The Top

*Markets see a 50% probability of a 50bp deposit rate hike in the ECB´s meeting on Thursday.

*Nancy Pelosi will visit Taiwan next month; China warns that the visit will have a considerably negative impact on relations with the US.

*Natural gas prices in Europe increased in light of risk that Russia will not open the Nord Stream pipeline this week after maintenance.

*Gasoline prices in the US dropped to their lowest levels in 2 months.

*Leaders of Iran, Russia and Turkey will meet in Tehran to discuss about Ukraine and Syria.

*EU contemplates easing sanctions on Russia to allow food trade.

*Inflation in Europe was confirmed at 8.6% annual in June.

*Democrats call on Biden to declare a climate emergency to force legislation stuck in Congress that favors green projects and limits the fossil fuel industry.

Economic environment

Decision in the ECB. The European Central Bank will make a monetary decision on Thursday. The bank is expected to start a monetary normalization process with its first interest rate increase in more than a decade. According to official statements made by the bank, it would carry out a 25 bp increase, but markets have started to speculate about a greater increase due to higher inflation in the region. The Euro has appreciated since it reached parity with the dollar last week as markets expect a 50bp increase. Last week, markets were taking said increase into consideration with a 20% probability – it is now at 50%. Nevertheless, there is no certainty that it will get majority vote among the ECB´s members. Christine Lagarde has affirmed that they could consider it, while members from Austria, Latvia and Lithuania have said they will look for a 50bp increase. Along with the interest rate increase, the bank is expected to announce a program that will give the bank flexibility concerning the reinvestment of its assets, which seeks to ease volatility in sovereign debt markets in Europe with the intention of avoiding a debt crisis and keeping monetary policy functioning properly in the European block. Details about the program and its reach have still not been defined and are expected to be discussed on Thursday.