European Central Bank is preparing to cut rates
ECB President Mario Draghi will return to the spotlight of stock market investors, supporting a return to a softer monetary policy on the part of major central banks, as it is widely expected that the ECB will lay the groundwork for lower interest rates or at least further action at the end of this year.
There is a possibility that ECB on Thursday may reduce interest rates after another weak portion of data, economists believe. The preliminary index of purchasing managers in the German manufacturing industry fell to a seven-year low by 43.1 in July from 45 in June, IHS Markit reported on Wednesday. Values below 50 indicate a decline in activity.
Most economists do not expect the ECB to lower interest rates or otherwise provide additional monetary stimulus at the end of the meeting on Thursday, but Draghi is expected to argue for lower interest rates this September and hint at a resumption of the bank's asset purchase program. The Stoxxx 600 Europe index grew by 1.6% in July and by almost 16% since the beginning of the year, while the S&P 500 added more than 20% since the beginning of the year after the high was renewed on Wednesday. The EURUSD pair, meanwhile, remained under pressure after falling to a two-month low vs. the dollar on Tuesday, changing hands in the recent activity of about $1.1137.