Key highlights of the week ended April 22

Source: Dukascopy Bank SA
Euro zone
The European Central Bank held its interest rates at record lows and kept the size of its bond-purchasing programme unchanged, allowing some time for fresh stimulus measures announced last month to affect the economy. The 25-member Governing Council maintained the benchmark rate at zero, the deposit rate at minus 0.4% and asset purchases at 80 billion euros month. ECB President Mario Draghi reiterated that there were still challenges ahead and there is a need to ensure that low inflation does not become entrenched, as the risks to the recovery remained "tilted to the downside". Thus, the monetary policy in the bloc will stay loose, if not looser, in the future. Also, Draghi particularly highlighted emerging market slowdown, subdued public investment and a lack of structural reforms.  

UK
Bank of England Governor Mark Carney took a chance to voice a fresh set of concerns about threats the UK economy may face should voters choose to exit from the European Union. In testimony to lawmakers in the House of Lords Carney said that a vote in favour of leaving the EU could result in "an extended period of uncertainty about the economic outlook" in the UK, with the potential to hurt trade, investment and growth. It could also undermine asset prices and the supply of credit in the economy, as well as make it more expensive for Britain to finance the gap added. Carney has previously described Brexit as the main domestic risk to Britain's financial stability. The Governor also stressed the benefits for Britain's economy from its open trading relationship with the EU, drawing criticism from some pro-Brexit lawmakers. 

US
New York Fed President William Dudley said US economic environment is "mostly favourable", but the US central bank remains cautious in hiking interest rates as threats loom. Dudley reiterated he was confident that too-low inflation would climb to a 2% target over the next few years, with "economic conditions have finally warranted the start of U.S. monetary policy normalization." The policy maker repeated his view that the Fed should take a gradual and cautious approach to monetary policy tightening amid significant uncertainties and headwinds to growth stemming from the financial crisis, which have not fully abated. 

Australia
The RBA voiced its discontent with the Australian Dollar's recent appreciation, which puts economy's' transition towards non-mining activity at risk. The Aussie Dollar has gained more than 12% in the past three months, and is the best performer after Canada's namesake among a group of 10 major currencies, supported by lower expectations of US monetary policy tightening and recovering commodity prices. However, RBA policy makers noted that "the recent rebound in commodity prices, even if sustained, was unlikely to lead to any material change in mining investment over the next couple of years." The RBA noted the economy's 3% growth in 2015 was better than expected and "broadly consistent" with last year's strengthened jobs market. It said recent information suggested the economy "had continued to grow at a moderate pace" in early 2016. The RBA meeting minutes stated that the bank expected inflation in Australia to remain low over the next year or two, partly due to the impact of the highest exchange rate


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