ECB President Mario Draghi sent separate letters to four Members of the European Parliaments today, explaining the impact of the central bank’s monetary policy. There Draghi noted the “overall effect” of ECB’s monetary policy on bank profitability has so far been “broadly neutral”. The negative impact on banks’ net interest margins has been offset by an improvement in the economic outlook that has led to an “increase in the total volume of loans” and, moreover,” improved credit quality”, which has reduced provisioning costs. Though, he also pledged to carefully monitor the overall effects of negative interest rates.
Draghi also said lending to non-financial corporations (NFCs) “recovered significantly” since the ECB introduced its non-standard monetary policy measures. And overall, the non-standard measures “have contributed to a more uniform transmission of monetary policy to bank lending rates across euro area countries and firm sizes.”
Moreover, taking into account both financial and macroeconomic effects, ECB research finds that “lower-income households have been among the main beneficiaries of the ECB’s non-standard monetary policy measures, through their positive impact on growth and employment creation.”
US retail sales rose 0.5%, ex-auto sales rose 0.5%, EUR/USD dives
US retail sales rose 0.5% mom in May, below expectation of 0.7% mom. But ex-auto sales rose 0.5% mom, above expectation of 0.4% mom. April’s headline sales was revised up from -0.2% mom to 0.3% mom. April’s ex-auto sales was also revised up from 0.1% mom to 0.5% mom.
Full release here.
EUR/USD breaks through 1.1251 minor support after the release. The development suggests that rebound from 1.1107 has completed at 1.1347. Intraday bias is now back on the downside for retesting 1.1107 low.