ECB and Fed Speeches on Radar
As the week comes to an end, investors’ are focused on any fresh cues that could further clarify that the European Central Bank (ECB) will implement additional stimulus measures and the Federal Reserve (Fed) would raise its rates for the first time since June 2006 next month. Earlier today, the Euro erased its gains against the majors after the ECB Chief hinted strongly at a rate cut and changes to its QE programme in December. Later in the day, some of the Fed officials are due to deliver their speeches.
On the macro front, the just out official figures indicated that Britain’s public sector borrowing declined less than forecast for a second consecutive month in October.
Pound Sterling – UK Markets
This morning, the last of the UK public finances data were released just now ahead of the Chancellor George Osborne’s Autumn Statement in the middle of the next week. The UK government reported that public deficit for October narrowed for a second straight month, albeit at a less than market estimated pace. Although the trend suggests falling budget deficit, but it is nowhere closer to the pace projected by the Office for Budget Responsibility (OBR) in its July forecasts for the full year. After the release of today’s government borrowing figures, the Chancellor is likely to be anxious about meeting its deficit target with only a couple of months left for the fiscal year to go.
Yesterday, the Pound – US Dollar currency pair came under a little pressure after weak October retail sales data, but the pair quickly reversed its losses and moved above the 1.53 mark in the latter part of the trading session. Also, the BoE Deputy Governor, Ben Broadbent downplayed the central bank’s recent subdued inflation projections and encouraged a minor upside rally in the currency pair.
US Dollar – US Markets
This morning, the greenback has managed to regain some lost ground against the Euro but it is trading in a tight range against Sterling and the Japanese Yen. The US Dollar has failed to hold on to the recent rally which was boosted following various signals that had heightened the prospects of a December rate increase. However, after the release of the minutes of the last FOMC monetary policy meeting, traders now appear to be focusing more on the Fed’s future rate rise trajectory which is still very uncertain. Fed Vice Chairman Stanley Fischer late yesterday stated that the US central bank has done the needful to prepare global markets for its first rate rise since 2006, however, he reiterated that the precise timing of the tightening of the policy has not been determined yet. He also noted that the US economy will continue to grow strongly than the rest of the world. The US Dollar erased some of its losses against the Euro following his remarks.
Amid no major US data releases today, investor focus will remain on fresh indications about the pace of policy tightening in the future.
Euro – European Markets
Yesterday, the minutes of the ECB’s October monetary policy meeting indicated that most of the members remained dovish as they favoured a further extension to the central bank’s quantitative easing programme in the next December meeting. Now before the upcoming policy meeting, markets will continue to monitor remarks by several central bank officials, especially the ECB Chief Mario Draghi’s remarks for further clarification that the bank will act to combat low inflationary pressures in the nation. This morning, the shared currency has softened across the board this morning, on ECB President’s dovish comments. He stressed that the central bank stands ready to act in order to address the low inflation problem.
In an otherwise light calendar day in Europe, data released earlier today revealed that German producer prices for October fell the most since February 2010 on an annual basis. Today, Euro zone’s preliminary consumer confidence report is scheduled, wherein expectations are for the indicator to show slight improvement for November.
Other Currencies – Highlights
Trimming its previous session losses, the US Dollar – Canadian Dollar currency pair has edged above the 1.33 mark this morning. The Canadian Dollar had earlier appreciated against its US currency counterpart following the publication of the minutes of the US Fed’s latest policy meeting which showed that the board members were still divided on when to proceed to increase its key interest rates from a decade low. Meanwhile, a softer Canadian wholesales trade report released yesterday had a little impact on trading in the Canadian Dollar against the greenback.
Even though there are hardly any notable US economic reports today, investors will watch out for two crucial data prints in Canada – retail sales and CPI data which are scheduled later in the session. These reports along with Canada’s GDP data are amongst the significant data points ahead of the next BoC interest rate decision announcement. Currency traders will scrutinise these reports for signs of easing price growth that could encourage the BoC Governor to adopt a dovish outlook for monetary policy.