The results of the first round of the Targeted Long Term Refinancing Options (TLTRO) Programme released yesterday indicated that banks borrowed just €82.6 billion at the auction, less than market expectations. This stoked speculation that the ECB might implement additional stimulus measures to shore up the ailing economy. However, the common currency showed little reaction to the results.This morning, the Euro-Sterling pair is trading under pressure as the outcome of the Scottish referendum revealed that majority of the voters supported Scotland to remain in the UK. Additionally, data released earlier today showed that German producer prices continued to decline for August, thereby heightening concerns that a deflationary threat is firming up in the Euro zone. Going ahead, market participants will keep a tab on next week’s speech from the ECB Chief, Mario Draghi, for hints about the prospects of further easing measures in the economy. Additionally, the preliminary manufacturing PMI readings for September across key European nations will be eyed to gauge economic conditions for the third quarter.
Scotland has been the most talked country across the globe in recent weeks and tomorrow’s referendum outcome could prove crucial for the medium term outlook of Sterling. It would be too close to take on call on the probable result, as recent poll surveys revealed that both the campaigns were running neck to neck, although showing a narrow lead for the “No” campaign. The uncertainty surrounding the Scottish independence outcome has also overshadowed today’s broadly encouraging UK retail sales data.Although the US Fed reiterated that interest rates would remain near record low levels for a considerable time, it raised interest rate projections for 2015. Across Europe, markets will eye the results of the ECB’s first round of TLTRO auction scheduled today.
Data just released indicated that the domestic unemployment rate and the number of people claiming jobless benefits continued to drop, thus suggesting that the nation’s labour market has sustained its recent positive performance. Additionally, the minutes of the latest BoE policy meeting revealed that two MPC members continued to vote for a rate hike, however, it remains to be seen if the debate intensifies in the upcoming meeting. However, market reaction to the domestic macro data is muted amid uncertainty surrounding tomorrow’s Scottish referendum.Although the US Fed is expected to announce another round of tapering and move closer to conclude its QE programme, markets will scrutinise the post-meeting statement to see whether the central bank makes any changes to its forward guidance.