Action Packed Day Ahead

With the economic situation in Europe seeing dramatic changes, today’s central bank meetings will offer clues to the monetary policy stance of both the major European central banks in the near term. While the BoE meeting is expected to be a low-key affair, given the improving economic conditions at home, the ECB meeting will be subject to close scrutiny and the central bank Chief’s post meeting press conference will be watched for gauging prospects of an interest rate cut going forward. The US third quarter GDP report will undoubtedly grab all market attention later in the day as will the jobless claims numbers, which will be a precursor to tomorrow’s non-farm payrolls report.

Pound Sterling – UK Markets

A slew of upbeat economic data propelled the Pound above the 1.61 level against the US Dollar in early trade yesterday before settling at slightly lower levels. The Halifax house price survey showed that house prices in the UK continued to move higher, albeit at a slower pace for October. Furthermore, industrial and manufacturing activity in the UK rebounded for September after exhibiting weakness in the earlier month. Meanwhile, the NIESR monthly GDP report indicated that the UK economy grew at a slightly slower pace for the three months ending October compared to the preceding three months. The Pound is trading in a tight range against the majors this morning ahead of the BoE policy meeting later today. Although, the central bank is unlikely to provide any surprises on the policy front, its outlook on the economy going forward will be closely scrutinised by investors for cues on future policy stance. Additionally, the ECB meeting and the US GDP report, among others, will determine Sterling’s movement against the majors today.

US Dollar – US Markets

The US Dollar traded on a weaker footing against the majors yesterday amid a lack of domestic economic triggers. Meanwhile, adding to the recent uncertainty surrounding QE3 tapering, the President of the Cleveland Fed, Sandra Pianalto has opined that the visible progress made by the labour market since the start of QE3 will allow the Fed to scale back its massive bond buying programme. Meanwhile, the greenback is trading range bound against the majors in today’s trading session as traders have adopted a wait and watch approach ahead of important domestic macro data later today. The delayed US third quarter GDP will offer insights into the trend in economic growth in the run up to the partial government shutdown witnessed last month, while the initial jobless claims numbers will also help investors ascertain the labour market conditions ahead of tomorrow’s all important non-farm payrolls report. Furthermore, monetary policy meetings of the BoE and ECB today will also influence investors’ risk appetite in the session ahead.

Euro – European Markets

The common currency moved broadly higher against the US Dollar yesterday, even as the string of mixed Euro zone macro data continued to confound markets on the status of the currency bloc’s economic recovery. While the final readings of the services PMIs across the Euro zone economies showed an improvement over their preliminary values, the Euro zone retail sales for September fell sharply, indicating weakness in consumer confidence and spending. However, the German factory orders report surprised investors on the upside, pointing towards an improving industrial outlook in the coming months. The single currency is trading under pressure against the majors in today’s trading session ahead of the ECB policy meeting and the ensuing press conference by its President, Mario Draghi. With the Euro zone macro data lately, particularly the inflation print, showing a sharp decline in prevailing economic conditions, which measures the central bank takes to lift the economy will be keenly eyed by market participants. Additionally, the German industrial output, the US third quarter GDP report and jobless claims print will determine movement of the Euro against the greenback going forward.

Other Currencies – Highlights

The Australian Dollar failed to maintain its recent upward momentum against the US Dollar this morning and weakened sharply against its peers this morning following the release of downbeat domestic employment report. Although the unemployment rate held steady for October, full-time employment in Australia dropped by the most in over a year. The disappointing labour market data also eclipsed the upbeat construction PMI print released earlier in the day. Moreover, uncertainty concerning the Fed tapering its QE3 programme in the near future supported the greenback, thereby weighing on the Aussie Dollar. With little on the domestic front to alter market sentiment, the Aussie Dollar will take direction from a slew of important economic news flows emanating from both sides of the Atlantic in today’s trading session. Looking ahead, the RBA monetary policy statement tomorrow will be closely followed by investors for insights into the central bank’s outlook towards the economy.