All Eyes on the ECB Today
The European Central Bank (ECB) is the highlight today with its monetary policy meeting scheduled to be held in a few hours. While the central bank is expected to oppose any change on interest rates, all attention will be on the accompanying press conference by the ECB President, Mario Draghi. Market participants hope to get an answer to the lingering question of whether the central bank chooses to extend its quantitative easing program beyond March 2017, particularly, after the referendum in Italy this weekend that has left Italian banks in a vulnerable spot.
In the UK, a report by the Royal Institution of Chartered Surveyors (RICS) showed that British house prices rose in November. Across the Atlantic, the US weekly jobless claims are up for release later today.
Pound Sterling – UK Markets
The Pound is trading higher against the US Dollar and the Euro this morning. Earlier in the session, a report by UK’s RICS revealed that British house prices advanced in November to record the highest reading since April, as new enquiries grew for the third straight month, amid a continued shortage of properties for sale. On the Brexit front, Britain’s Supreme Court hearing on the government’s appeal has entered Day-4 today. While speaking on Day-3 of the Supreme Court hearing, Scotland's top legal officer, Lord Advocate James Wolffe, stated that the Scottish Parliament's consent should be taken before Britain initiates the official Brexit process.
Yesterday, Sterling ended lower against its major peers, thanks to the release of some poor economic data. Britain’s manufacturing production surprisingly weakened in October, registering its largest decline since February. Industrial production also followed suit with a poor reading. Separately, the National Institute of Economic and Social Research estimated UK’s GDP at 0.4% for the three months ended November, same as in the preceding three months to October.
US Dollar – US Markets
The greenback weakened against most of its major peers yesterday. A report by the US Job Openings and Labour Turnover Survey revealed that job openings, a closely watched gauge by the Federal Reserve (Fed) Chairwoman, Janet Yellen, rose more than estimated for October. This further strengthens the prospects of a rate increase at the Fed’s upcoming meeting. Additionally, a report by the Fed showed that consumer credit rose at a slower pace than expected in October. Separately, the nation’s MBA mortgage applications registered a drop last week.
The US Dollar is trading on a weaker footing against the shared currency and Pound this morning, ahead of the sole economic release in the US. For example, initial jobless claims are expected to show a decline. In the previous week, the number of people seeking unemployment benefits rose to the highest level in five months. The greenback is expected to continue being governed solely by data releases this week, as the blackout period ahead of next week’s monetary policy meeting is already in place.
Euro – European Markets
The shared currency was up against the greenback and down against the Pound this morning. Earlier in the session, data showed that French business sentiment index rose more than anticipated in November and nonfarm payrolls advanced in line with market consensus during 3Q 2016.
Ahead in the session, market participants keenly await the ECB’s monetary policy meeting and its accompanying press conference. It is widely expected that the central bank will extend the duration of its generous asset purchase programme in its quest to boost stubbornly weak price growth in the region. Despite repeated attempts to revive the economy, success has remained elusive for the ECB. Moreover, wage growth has been significantly low. Further, in another discouraging sign for the Eurozone economy, data released yesterday showed that German industrial production figures fell short of forecasts in October, suggesting that the Euro region’s powerhouse economy still remains in a weak state.
Other Currencies – Highlights
The Canadian dollar has extended its upside momentum against the greenback, after the Bank of Canada (BoC) left benchmark interest rate unchanged at 0.5%, as widely expected. The central bank displayed a very neutral tone in its monetary policy statement and indicated that the Canadian economy is growing in line with expectations, though exports—a key driver of growth and business investments—have continued to disappoint. Further, the BoC highlighted that the nation grew at a robust pace during the third quarter, following a weak first half, and that it expects growth to moderate during the fourth quarter. Canada’s resource-reliant economy has struggled over the past two years to adapt to lower crude oil prices, resulting in lower business investment. In order to kick-start growth, the BoC had slashed its key interest rate twice in 2015, but has held steady through 2016.
Looking ahead, there are a few economic releases lined up today in Canada. These include the nation’s housing starts, building permits and new housing price index, all due later in the day.