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On the sidelines of an economics conference in southern France, the European Central Bank (ECB) policymaker, Francois Villeroy de Galhau, said in an interview released on Monday  that the ECB  will decide its next policy moves based on incoming economic data and not financial market swings.

“We look at the markets but we are not market dependent. We are data dependent,” “So let us wait for our next governing councils and there are several to come  to assess the data and then to decide,” he added.

Additional comments:

  • The ECB look at the markets but we are not market dependent, we are data dependent.
  • If and when needed, there must be no doubt about our determination to act and our capacity to act.

FX implications

We have been through a cycle of where bond yields have been falling further  due to worsening data, raising market speculation that we are in a new easing cycle.  Villeroy said that uncertainty created by trade tensions were the number one threat to the global economy, which central banks could do little to fix and the major concerns are that the ECB has little further room on the downside to handle another downturn in the EZ economy. This is weighing on EUR/USD and if it were not for the strong market belief that the Federal Reserve is now on an easing path, EUR/USD could well be below 1.1000.