The Euro bounced back after the ECB disappointed markets with the action taken on Thursday. The deposit rate was cut by 10bps as widely expected but the refinancing rate was left unchanged even though some analysts were expecting a cut. Draghi also avoided saying whether or not the deposit rate was now at the lower bound. The QE purchase programme was extended by six months to March 2017, again this fell short of some expected this to extended to August 2017. Most importantly there was no acceleration of the pace of QE purchases, surprising many market participants. As a result of the downward movement of the single currency going into the meeting, it was no surprise to see the single currency bounce after the market was left underwhelmed.
Meanwhile, the US remain on track to raise rates this month after the non-farm payrolls rose 211k in November with a 35k of upward revisions to the prior two months. This is a solid number and as a result pushes the probability of a hike on the 16th of December to 78%.
It is a fairly quiet today as the Euro group meeting kicks off. The majority of the focus will be on BOE Gov Carney who is due to testify before the European Parliament Committee on Economic and Monetary Affairs, in Brussels.
With the Fed meeting fast approaching focus will remain on the economic data released from the world’s largest economy. The JOLTS job openings from the US will be under scrutiny as the employment data plays a key role in the FOMC’s decision making. Also due to hit the wires is the UK manufacturing and NIESR GDP Estimate.
The docket is very light today but the focus will be on the crude oil inventories. After the collapse in oil price this year and its recent move below $40 per barrel, the inventories will be watched to see how much oil is being held, which could in turn have an effect on price. Meanwhile the RBNZ will be releasing the latest decision on interest rates. It is expected that the central bank will cut rates by 0.25%.
The BoE will take centre stage today as the committee meet to discuss monetary policy. Whilst no change is expected much of the focus will be on the communication from the BoE to the market regarding future policy plans. Meanwhile the weekly jobless claims from the US will keep the market on its toes.
Closing the week we have a key economic report from the US that could strengthen the view on a US “lift off” next week. The main focus will be on US retail sales and consumer sentiment. If we see two solid numbers here it is almost certain we will see the Fed take action next week.