ECB President Draghi in the Spotlight Today
Friday’s dovish comments by European Central Bank (ECB) President Mario Draghi has put spotlight on this week’s important PMI data from the Eurozone region. Draghi cautioned that Eurozone’s GDP remained weak and was mired with risks, while also adding that the economy was heavily dependent on ECB stimulus. This has increased speculation among traders that the ECB may opt for a boost to its existing stimulus measures. Upcoming important data this week of Eurozone’s main growth engine in the form of German business sentiment & outlook along with the GDP data also assumes importance.
Today’s economic calendar looks a bit bare and pales in comparison to the rest of the week. Still, investors look forward to a Mario Draghi speech yet again and German Bundesbank's monthly report.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the shared currency this morning, ahead of Wednesday’s Autumn Statement. Traders are eyeing UK Chancellor Hammond’s first Autumn statement, which is expected to shed light on the amount of fiscal stimulus the Government is ready to disperse, and which, if considerably boosted, is likely to push up interest rates. This would benefit the Pound Sterling, as it would take a load off the back of the Bank of England to print money and avail that stimulus instead. There are no economic releases in the UK today and market participants would look forward to global events for direction.
On Friday, Sterling failed to latch onto gains triggered by upbeat UK retail sales as a bout of profit taking infected investors’ mood. The Pound also came under pressure due to comments made by German Finance Minister Wolfgang Schäuble, who cautioned that Britain may need to continue giving money to the European Union even after leaving the bloc.
US Dollar – US Markets
The US Dollar is trading near a 13 ½ year high a basket of currencies this morning, amid mounting expectations that the US Federal Reserve (Fed) will raise interest rates in December. Moreover, expectations are rife that the newly elected US President, Donald Trump, will adopt expansionary monetary policies, leading to higher inflation and consequently an interest rate increase. Further, the latest to cement hopes for an interest rate rise was the Kansas City Fed President, Esther George. She stated that the US economy would be benefitted if interest rates are raised “sooner rather than later”. Additionally, Fed policymaker, James Bullard, joined in the rate rise chorus. On the economic data front, leading indicator in the US advanced in October, in line with expectations. Meanwhile, the Kansas City Fed manufacturing index declined in November, albeit remaining in positive territory.
Today, traders will look ahead to the sole economic release in the US, i.e. the Chicago Fed national activity index for October. Additionally, a speech by the Fed Vice Chairman, Stanley Fischer, will be eyed.
Euro – European Markets
The Euro is trading higher against the greenback and Pound this morning. As the Eurozone calendar is devoid of any key economic releases today, investors will await the ECB President, Mario Draghi’s speech today at European Parliament in Strasbourg. Going ahead, the currency bloc’s economic calendar looks busy this week, with market participants tracking Eurozone’s preliminary consumer confidence index and Markit’s survey on manufacturing and services PMIs across the region. The manufacturing and services PMIs are anticipated to expand for November. Moreover, traders will eye the final print of the German gross domestic product, which is expected to slow in the third quarter, in line with preliminary estimates.
On Friday, the shared currency ended lower against the US Dollar. The ECB President, Mario Draghi, warned that the region’s economy was surrounded by risks and heavily reliant on the central bank’s stimulus measures. Meanwhile, Germany’s producer prices witnessed a sharp rebound in October.
Other Currencies – Highlights
The Japanese Yen is trading lower against the US Dollar this morning, pressured by expectations that the US might hasten the pace of rate rises going forward. On the macroeconomic front, data released overnight indicated that Japan’s adjusted merchandise trade surplus slightly narrowed in October, beating market expectations for a wider surplus. The nation’s exports fell more than expected on an annual basis in October, registering its consecutive 13th monthly decline. Moreover, annual imports dropped for a 22nd consecutive month. On the other hand, the all industry activity index unexpectedly advanced in September.
Ahead in the week, traders will eye a few economic releases in Japan, namely, the preliminary Nikkei manufacturing PMI, leading and coincident index along with the national consumer price index. The core inflation figure is expected to decline on an annual basis in October.