Financial Markets Daily Report
23 July 2021

The new forward guidance of the ECB, a tilt more dovish, was received smoothly by financial markets in a session where investor sentiment continued to improve on the back of positive corporate results.

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  • The new forward guidance of the ECB, a tilt more dovish, was received smoothly by financial markets in a session where investor sentiment continued to improve on the back of positive corporate results.
  • In this context, stock indices rose across the board and yields on sovereign bonds edged down, both in the euro area and in the US. In FX markets, the euro weakened against most advanced economies’ currencies and fluctuated below $1.18. The barrel of Brent rose above $73 as investors’ expectations on future oil demand improved.
  • The ECB kept its monetary policy unchanged (depo rate at -0.50%, PEPP net purchases at 80bn per month during Q3 and APP at 20bn) but adjusted the forward guidance on interest rates to the new strategy. It set a higher bar for raising interest rates as, among others, inflation will need to reach 2% "well ahead the end of its projection horizon".
  • Today the focus will be on July’s flash PMIs for the main advanced economies.
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