By Abdulselam Durdak
Frankfurt letter, week beginning Oct. 31

-The European Central Bank

Last week, markets closely watched new statements made by the European Central Bank (ECB) regarding possible policy changes.

European Central Bank President Mario Draghi said the ECB is aware of other distortions that can result from low and negative interest rates and would therefore rather not keep interest rates at such low levels for an excessively long time.

“We remain committed to preserving the very substantial degree of monetary accommodation which is necessary to secure the ECB’s goal of keeping inflation just below 2 percent,” Draghi said at a lecture in Berlin.

Speaking in Frankfurt, member of the executive board of the ECB, Benoit Coeure said there were limits to how low interest rates could go.

"First of all there is the physical lower bound, where households and businesses disintermediate the banking sector and hold their money in cash. Experience of other central banks shows that the physical lower bound is below where we currently have our deposit facility rate," he said.


-News from Germany

German manufacturers’ export expectations continue to climb.

According to Munich-based economic Institute, Ifo, German manufacturers are expecting a significant rise in the number of orders from abroad. Their export expectations rose from 8.8 balance points in September to 14.1 balance points in October, marking their sharpest upturn since February 2013.

German exporters are increasingly benefiting from the brighter world economic environment.

Additionally, German companies are planning to recruit more additional staff this month. The Ifo’s employment barometer rose to 110.7 points in October from 110.2 points last month, reaching its second highest level ever. Companies in nearly all branches are continuing to look for additional personnel.

The German lender Deutsche Bank, announced last week the third-quarter’s net income of €278 million beating market expectations. This compares favorably to the €6 billion loss for the same period a year ago.


- The week ahead

This week, markets will continue to monitor the developments on global markets and concentrate on ECB statements. On the data side, flash estimate Euro area inflation, preliminary flash estimates of the EU and Euro area GDP and unemployment data will be released.

31 Oct,2016