(MENAFN– ecpulse) This week, the focus will be on the European Central Bank rate decision for October amid the presence of some hints from ECB President Mario Draghi there could be a third round of cheap loans to banks.
Draghi will probably repeat his guidance that interest rate would remain at the current low level or even lower for an extended period of time to keep its support to recovery which is gathering momentum.
The ECB President said in September that the economy will gradually recover, at subdued pace, later this year, where recent survey and confidence indicators showed signs of improvement from low levels and "tentatively" confirm signs of recovery.
Data released last week showed that European economic confidence rose to 96.9 in September, the highest since August 2011, from a revised of 95.3.
A report due this week may confirm that European manufacturing and services resumed expansion in September at the fastest pace in more than two years. A composite of manufacturing and services is predicted to remain unrevised at 52.1 in September from the prior of 51.5, according to PMI final reading.
The new growth forecast showed that the ECB now predicts a drop of 0.4% this year, then a rebound of 1% next year, compared to June’s projections of 0.6% drop this year and a rise of 1.1% in 2014.
However, ECB President Mario Draghi said “I’ m very cautious about recovery.”
The euro area lenders are still facing a drop in lending as a report from the ECB released last week showed that lending dipped further in August.
Draghi last week that the ECB is ready to offer another round long-term refinancing operation (LTRO) as an option to push down money market interest rates only if needed.
He hailed the previous two LTROs, issued in 2011-2012, revealing that they helped push lower interest rates, ease Europe`s debt crisis, and reduce fears that banks might collapse and bring down the public finances of weak states like Spain or Italy by giving banks almost €1 trillion in three-year loans.
United Kingdom
The attention in the U.K. will remain on economic reports as investors are trying to get evidence that Britain is moving on the right track.
After the U.K. confirmed 0.7 percent expansion in the second quarter and the BOE has revised its growth forecast for the third quarter to 0.7 percent from 0.5 percent, estimated in August’s inflation report, eyes will focus on September’s PMI data.
The manufacturing sector will resume its expansion to 57.3 in September from 57.2 in August while services will linger its expansion at 60.5 in September, according to median forecasts to this week’s report.
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