After last week saw the Euro fall to a 7 month low against the Dollar and the Pound also losing ground against the Greenback, this week’s focus remains on the Euro and the Dollar. As the week opens today with no high tier data being released, all are awaiting for Thursday as the ECB are set to release their interest rate decision followed by Mario Draghi, the head of the ECB speaking shortly after. Investors remain nervous ahead of the December European Central Bank meeting, where the central bank is expected to adjust its QE program, which might create further selling pressure on the Euro, unless it had been already priced in.
As the Eurozone are looking to possibly add further stimulus to help the economy, across the Atlantic is a different picture, the US are on the verge of increasing interest rates. This week could help give economists a clearer picture on whether the Fed will pull the trigger on the 16th of December, as this Friday sees the release of the Non-farm figure. If the figure remains above the 200k reading it will again add more weight for the FOMC to be looking to increase rates for the first time since 2008, which will see the Greenback strengthen in anticipation of the Feds action.
The diverging policies of the Fed and ECB next month will be the markets main focus until year end. Economists’ are still torn between whether the US will raise rates in December or continue to hold off until 2016, December is arguably the biggest month of 2015 and next month’s news could set the tone for 2016.
A quiet start for today with only some second tier data releases being seen.
A host of PMI data is released today, firstly from China as in the early hours they post their manufacturing PMI figure which is to remain in contraction but only just, with forecasts at 49.9. From the Eurozone the PMI for manufacturing is also released followed by the unemployment rate which currently sits at 10.8%. The UK and US are set to see their manufacturing PMI’s remain the same as previous readings.
Inflation gauge from the single currency zone will be watched by markets today as the y/y figure is expected to slightly increase to 0.2%. This leads into Thursday central bank meeting as already stated above, inflation is the main concern of the ECB and prompting further action to tackle this. From the US, markets get an insight into Fridays all important Non-farm employment figure, as the ADP employment reading is released.
Although the UK release the Services PMI figure, this is just a side event as the ECB will take center stage. As markets await to see what action the ECB will take and what the head Mario Draghi will state in the conference after the rate decision, the Euro is definitely set for a bumpy ride. The head of the Fed Janet Yellen, later in the afternoon testifies in Washington on monetary policy, which could see some volatility for the Greenback.
The main focus of markets will be set on the Non-Farm figure, as this is the last reading before the Feds last meeting of 2015. As this gauge is a precursor to whether the FOMC will raise rates, the Dollar will be very volatile as markets will try and decipher the number and the probability of a rate rise to be this year.