Marketmind: Lower forever for ‘Generation T’?

It’s now most likely those born in the euro zone in 2011 won’t get to see an interest rate hike until their teens (imagine the FOMO!).

Indeed, the European Central Bank said on Thursday it would not hike borrowing costs until it sees inflation reaching its 2% target.

And because it only forecasts prices to rise by 1.4% in 2023, the first rate hike since the debt crisis isn’t expected before 2024 when ‘Generation T’ (for former ECB President Jean-Claude

Trichet) will reach teen age.

Truth be said, expectations were low prior the ECB meeting with Paul Donovan, Chief Economist at UBS GWM, sarcastically writing that markets would be eager to know how the ECB intended to

miss its new target this time.

Negative rates, trillions of euros worth of monetary and fiscal stimulus, labour shortages, production bottlenecks, a global shipping container shortage, commodities and oil prices rising

and still the outlook for inflation is muted.

Now with growing fears the Delta variant could slow down the pace of the recovery, investors find themselves paying to hold Germany bonds with 10-year yields at -0.41% and near their lowest

levels since February.

A slew of business activity surveys due on Friday are expected to show a slight softening of activity in Europe. That could weigh on the euro, which fell after the ECB meeting and is trading

at $1.1773 — not far from recent three-month lows.

Attention is expected to shift to the U.S. ahead of next week’s Federal Reserve’s meeting.

News on Thursday of an unexpected hike in the number of U.S. workers filing first-time applications for unemployment didn’t derail Wall Street, which saw its three major indexes end the

session within 1% of their record closing highs.

Asia shares slipped overnight, but futures for Europe and the U.S. point higher, meaning losses sustained during Monday’s Delta variant selloff have been recouped.

Key developments that should provide more direction to markets on Friday:

– POLL-S.Korea likely posted biggest annual growth since 2010 in Q2

– Vodafone posts 3.3% rise in Q1 revenue as Europe returns to growth

Graphic: Benchmark German 10-year yield – https://fingfx.thomsonreuters.com/gfx/mkt/mopanmkeeva/Pasted%20image%201627023030561.png

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