ECB the focus in light week for data

Sun May 4, 2014 3:44pm EDT
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By Jonathan Cable

LONDON (Reuters) - Euro zone policymakers get their main monthly chance this week to adjust their rhetoric about further monetary stimulus, although with inflation creeping a bit higher there, talk is more likely than action.

Markets will also keep an eye on purchasing managers' surveys, due early in the week from around the world, to see how the global economy fared at the start of the second quarter.

Fighting between Ukraine's army and pro-Russian groups in the east has intensified and a further deterioration in the region has the potential to spook markets, which have been paying less heed to the trouble in recent weeks.

While several major central banks meet to decide policy in the week and the chair of the U.S. Federal Reserve will testify in front of lawmakers, the European Central Bank's meeting and press conference will be the main focus.

ECB President Mario Draghi and the Governing Council meet with a tiny bit of pressure taken off by a modest rise in very low inflation and by business surveys showing a more broad-based, but still fragile recovery.

"To some extent, the bounceback in inflation has helped take some of the sting out of the tail at the meeting, with the (ECB) Governing Council under less pressure to act quickly," said Philip Shaw, chief economist at Investec.

What has got financial markets excited is the prospect of quantitative easing from the ECB at some point in the future, and what another wave of cash might do to asset prices.

But it is clear that any bond-buying program similar to what the Bank of England has already done and what the Federal Reserve is now winding down after half a decade is probably a way off, if it ever happens at all.   Continued...

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/Kai Pfaffenbach