Mario Draghi and Janet Yellen Take Centre Stage Today
The US continues to command attention for the second straight day. Along with a couple of economic releases there is also an impressive line-up of Federal Reserve (Fed) speakers today - Chairwoman Janet Yellen will be at the forefront as she testifies before the US House Financial Services Committee about financial regulation. On the data front, the US weekly mortgage applications and durable goods orders are both up for release.
The UK economic calendar looks empty today. In the Eurozone, today’s highlight will be European Central Bank (ECB) President Mario Draghi’s appearance before the German Bundestag, where he will try to woo his skeptics. It will be his first appearance there in nearly 4 years.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the Euro this morning. Today there are no economic data points in the UK, but the consumer confidence index and second quarter GDP data are scheduled for release during the next 2 days.
Yesterday, the Confederation of British Industry’s (CBI) retail sales balance dropped for September after a strong showing in August, where the indicator rose to a 6-month high level. While sales of clothing and home hardware material recorded above-average growth, that of food and footwear declined. Separately, the Bank of England Governor, Mark Carney, indicated that there are positive long-term prospects for the UK economy, and that it is performing as the central bank had expected when it introduced stimulus measures last month to cushion the economy from the after effects of the Brexit vote.
US Dollar – US Markets
The US Dollar is trading stronger against the Pound and the shared currency this morning. The US durable goods orders data, scheduled to be released later in the day, will attract a significant amount of market attention. Additionally, market participants will keep a close eye on Janet Yellen’s testimony before the House Financial Services Committee later today.
Yesterday, data indicated that US consumer confidence index unexpectedly climbed in September, notching its highest level since 2007, reflecting optimism in the labour market. Also, the US flash Markit services PMI rose more than expected in September - indicating growth in the nation’s services sector activity - and the US Richmond Fed manufacturing index improved at the same time. Separately, the Fed Vice Chairman, Stanley Fischer, stated that the Fed should avoid raising interest rate too much and added that increase in US income indicates that workers are benefiting from a tighter labour market.
Euro – European Markets
The shared currency is trading mixed against its major peers this morning. Earlier in the session, data showed that German consumer confidence slightly softened for October. French consumer confidence held steady this month, but in Italy the consumer confidence index surprisingly fell while business confidence unexpectedly advanced. The ECB President, Mario Draghi, will be walking into a lions’ den today as he addresses German lawmakers at the Bundestag lower house of parliament’s European Affairs committee, which comprises some of his fiercest critics.
Yesterday, data showed that the German import price index dropped more than expected in August, reversing its previous month’s increase. On an annual basis, the nation’s import prices continued to fall, but the pace of decline slowed for the fourth consecutive month. This was the slowest pace of decline since July 2015.
Other Currencies – Highlights
The Swiss Franc is trading on a weaker footing against the greenback this morning. Data released earlier in the session showed that Switzerland’s UBS consumption indicator advanced in August, buoyed by a resurgence in tourism and above-average car sales.
Separately, a report by a private consulting firm painted a bleak picture of the Swiss watch industry, with the number of pessimistic watchmakers in the Alpine economy almost doubling since last year. Switzerland’s watch industry is currently facing weak demand from foreign countries and the survey revealed that watch executives believe that this scenario will continue for the next 12 months. In other news, the International Monetary Fund advised the Swiss National Bank (SNB) to consider a deeper negative interest rate rather than currency interventions in order to weaken the Swiss Franc’s appeal. The SNB implements the twin policy of negative rates and forex market intervention to reduce deflationary pressures in the country and to weather last year’s surge in the domestic currency.