Will the ECB wind down its bond buying?
It’s all eyes on the European Central Bank (ECB) today, as it publishes its account of the September monetary policy meeting. These minutes will be scrutinised for clues on the central bank’s plans in the wake of fresh rumours that the ECB is planning to wind down its €80.0 billion monthly bond purchases before ending its quantitative easing programme. Later today, the ECB President, Mario Draghi, will meet with other central bank leaders and G20 finance ministers at a working dinner in Washington, ahead of annual meetings of the International Monetary Fund. Data wise, German factory orders surpassed expectations in August.
There’s nothing new to report for the UK today, but across the Atlantic the US weekly jobless claims data is on its way.
Pound Sterling – UK Markets
The Pound has reversed its previous session gains and is trading lower against the US Dollar this morning. There are no crucial economic releases today, however there’s plenty to look forward to tomorrow - the UK’s industrial production, trade balance, house prices and the NIESR GDP estimate for the 3 months ended September.
Yesterday, Sterling recovered against the greenback after hitting a 31-year trough during the previous session. The Pound also ended higher against the Euro yesterday, thanks to a surprise rise in UK’s services PMI data for September. Britain’s powerhouse services sector continued to grow during the month, after sharply shrinking immediately after the Brexit vote. Separately, the Bank of England’s Deputy Governor, Ben Broadbent, stated that Britain performed better than expected post Brexit, mainly due to stronger consumption and a weaker Pound.
US Dollar – US Markets
The greenback is trading in the positive territory against the Euro and Pound this morning. The main focus for today will be the US weekly jobless claims data. The number of Americans filing for unemployment benefits is expected to have risen last week. Looking ahead, the US nonfarm payrolls data for September remains the most crucial data point for tomorrow.
The US Dollar strengthened against its major peers yesterday, after the US ISM non-manufacturing PMI jumped to a 11-month high in September, indicating that America’s economy is expanding steadily. The final reading of Markit services PMI was revised higher for September compared to its preliminary print, and, the US ADP employment change showed that private sector added jobs at the slowest pace in 6 months for September. Meanwhile, the nation’s trade deficit widened more than anticipated in August. In other economic news, US final durable goods orders advanced more than expected in August.
Euro – European Markets
The shared currency is trading lower against the greenback and the Pound this morning. Data released earlier during the session showed that German factory orders advanced above expectations in August, buoyed by a rise in domestic demand. This is the second consecutive increase in factory orders and is also the biggest rise since March this year. This latest set of robust data follows closely on the heels of Germany’s business sentiment index, released just last week, which had surged to an over 2-year high level in September. This indicates that corporate concerns over the consequences of Britain’s decision to leave the EU are slowly easing. The focus is now on the ECB’s September monetary policy meeting minutes - due later today, they will help put to rest the ongoing speculation that the central bank will eventually wind down its bond-buying stimulus programme.
Yesterday, data showed that the Eurozone’s retail sales dropped less than expected in August. The July figures were revised by Eurostat, owing to reduced sales figures in Germany and France.
Other Currencies – Highlights
The Australian Dollar is trading on a weaker footing against the greenback, amid a broad based strength in the US Dollar. Data released earlier in the session showed that Australia’s trade deficit sharply narrowed in August, registering its smallest deficit since April this year. Meanwhile, exports remained unchanged and imports flat-lined for the second consecutive month. Australia’s AiG performance of construction index is scheduled to be released later.
Yesterday, the Australian Dollar edged higher against the US Dollar following encouraging retail sales data for August after months of tepid growth. Providing some much-needed relief to the Reserve Bank of Australia, the nation’s retail sales smashed market expectations to record its largest increase since October 2015. The upbeat result was attributed to a surge in department store sales, which had registered a steep decline in July and thus left the overall sales level flat. Separately, service sector activity advanced in September but remained in contractionary territory for the second consecutive month.