Key highlights of the week ended October 23

Source: Dukascopy Bank SA
Euro zone
The European Central Bank maintained interest rates unchanged at a record low 0.05% and kept the deposit rate and marginal lending rate at –0.2% and 0.3%, respectively. However, ECB President Mario Draghi said that the central bank is ready to deploy another big-bang stimulus package, which could include more bond purchases and a cut to the already negative deposit rate. Financial markets surged amid expectations of extra ECB stimulus measures, whereas the Euro plunged to the lowest level in two weeks versus the US Dollar of $1.1152. Draghi's statement concerning additional stimulus underscores the fragile state of the global economy. ECB President also revealed that some policy makers of the governing council had insisted on taking more action to underpin the region's economy immediately, blaming the downturn in the emerging markets, including China, for renewed weakness in the Euro bloc. 

Canada
The Bank of Canada left its key overnight lending rate unchanged at 0.5% after cutting it twice this year, saying that nation's economy rebounded as predicted in July. Household spending continued to support economic activity and is projected to increase at a moderate pace. Non-resource sectors benefitted from the stimulative effects of previous monetary policy actions as well as depreciation of the Canadian Dollar. Meanwhile, lower commodity prices lowered Canada's terms of trade and dampened business investment and exports in the resource sector. This prompted the Bank of Canada to modestly downgrade growth forecasts for 2016 and 2017. The central bank expected the nation's economic output to increase by just over 1.0% in 2015 and 2.0% in 2016, compared with a July forecast of 2.3% growth next year.  For 2017, growth is predicted to be 2.5% instead of 2.6%.

Australia
The Reserve Bank of Australia reiterated its view that a weak Australian Dollar and record low interest rates helped to rebalance the nation's economy and strengthen the labour market. Even though the central bank expected a period of sluggish economic activity ahead, meaning monetary policy is likely to stay loose for some time, the RBA looked to be in no mood to cut interest rates, the minutes of its October 6 policy meeting showed. The key risks to financial stability and to the Australian's economy overall revolve around developments in an overheated property market. House prices in major cities like Sydney and Melbourne have surged sharply over the last year, triggered by speculative investment, low interest rates and robust demand from overseas buyers. The RBA warned about an imbalance in lending and risks of potential house price falls. 

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