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Corrective Cycle Still In Play

COLOMBIA

BanRep Preview – October 29 1900BST/1400ET

MNI (London)
By Christian Vits
     FRANKFURT (MNI) - Market expectations that the first European Central Bank
interest rate increase for the current cycle will come in the middle of next
year are a plausible anticipation of the way forward, Governing Council member
Jens Weidmann said Monday.
     "Markets expect a first hike in interest rates at about the middle of next
year, that is probably not unrealistic," the Bundesbank President said. He also
underlined that financial markets for some time forecast an end of the ECB's
asset purchases "still in 2018."
     But even without net bond buys, monetary policy will maintain its expansive
stance, Weidmann added, as the bank announced the re-investment of maturing
assets.
     "The end of net purchases is only the starting point of a multi-year
normalisation of monetary policy," he said. "Therefore, it is so important to
actually start it soon."
     Such a normalisation of policy will also open-up some leeway for the
central bank to react on possible future economic downturns. "Because the
current upswing won't last forever either," Weidmann stressed.
     With a view to current trade tensions Weidmann said that it is in no one's
interest to spark a trade war. If anything, it should be the aim to reduce
existing trade barriers instead of avoiding new tariffs or keeping them low.
--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com
[TOPICS: M$E$$$,M$G$$$,M$X$$$,MC$$$$,M$$EC$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com