There are still divergences between the monetary policies of the Fed and the ECB. But if Draghi meets expectations for progressive withdrawal of the stimuli from September and rate hikes in the first few months of 2018, a new “currencies war” is not on the cards in the near future.
Investors realise that the political risk in France has decreased substantially and are less concerned about what might happen on the political front in Italy and Germany. Now it’s time to look at companies’ fundamentals once again and continue to focus on the ECB’s decisions over the coming months.
The savings rate for Spanish households is currently 7.7% of their gross disposable income, the lowest level for a decade. The fact is that the current low interest rate scenario doesn’t encourage saving, but boosts households’ tendency for spending.
Banco Popular has hugely damaged the reputation of the Spanish banking sector and its European counterpart after reformulating its 2016 accounts just two months after making them public. Investors are penalising the listed banks as the sector’s credibility is once again being questioned.
Lately there is growing criticism of the ECB over its supposed “democratic deficit”. It is being accused of oversteppping the mark by being obliged to take “political decisions”.
The Eurozone is showing positive signs of growth and inflation. But the risk premium levels of the peripheral countries are still very high compared with those at the start of this year. In the short-term, they will move to the political beat, particularly any news on the French election.
International organisations and the leading research departments are revising their growth forecasts upwards for the Spanish economy for this year and 2018. But at the same time, they note that Spain’s recovery is not reaching most wage earners.
Once again Mario Draghi followed the expected script: it kept interest rates at 0%, where they have been for the last year; it left the deposit facility unchanged at -0.4% and did not modify the debt purchasing programme.
The leading research departments have begun to make upward revisions to their forecasts for the Spanish economy in 2017 and 2018. The GDP figures confirm that our economy did not lose momentum in the final part of 2016 (in the end GDP grew 3.2% for the year as a whole). And the indicators on activity and confidence at the start of 2017 show a slight acceleration. The good performance from the labour market, and Spain’s competitive exports, will be key growth drivers.
Popular’s share price is very volatile and is up around 8% from its year lows, amid rumours that the only option for the troubled bank is to merge with another bigger lender.