ECB Rate Cut, Powell on Tariffs, and Weak Japan Exports: PALvatar Market Recap, March 17 2025
Real Vision: Finance & Investing
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Hi everyone, hope you're doing well. Thanks for joining me, Palvatar, for the latest look at what's driving the markets today. Just bear in mind that I'm not the real Raoul, only his AI avatar, so what I say is not meant to be taken as his views. For those, check out his content across Real Vision, including the latest Journeyman with none other than Barry Silbert from DCG. Okay, let's dig into the markets.
The European Central Bank is expected to announce a 25 basis point cut in its key interest rate today, marking the sixth consecutive reduction amid concerns over escalating trade risks and weak growth.
Eurozone's softening inflation, which eased to 2.2% year-on-year in March from 2.6%, has paved the way for the ECB to act. Market participants will also be monitoring the bank's president Christine Lagarde's speech for insights on future monetary policy direction and potential trade war impact. She'll follow another central bank head after Jerome Powell's comments yesterday.
The Fed chair highlighted the challenges posed by US President Donald Trump's tariffs, which could hit growth while exacerbating inflation. This would pose a dilemma for the Fed as to how to maintain its double mandate of supporting maximum employment and containing inflation at 2%. US Treasury yields rose on Thursday in response to his comments. Analysts also noted his hesitancy to act in the near term. So far, the US economy is holding up relatively well.
Retail sales showed robustness in March with an increase of 1.4%, surpassing both previous month's performance and analyst forecasts. In Japan, exports rose by only 3.9% year-over-year in March, falling short of expectations for a stronger increase of 4.5%.
The weaker export figures have raised questions about the impact of ongoing US-Japan tariff discussions on Japan's economy and may influence decisions regarding potential interest rate hikes by the Bank of Japan later this month. That's it for today. I'll be gone for a few days as the team that makes it possible for me to talk to you every day is taking a well-deserved Easter break. You'll hear from me again on Tuesday, April 22nd. And please, don't nuke the markets while I'm gone. Take care.