The Euro remained under pressure despite the positive PMI numbers from the Eurozone. The composite PMI rose 0.5pts to a new cyclical high of 54.4, with the composite new orders and employment indices seeing their best levels since 2011. However, the Euro was trading at a seven month low after Draghi’s signposting this weekend. He stated “if we decide that the current trajectory of our policy is not sufficient to achieve that objective, we will do what we must to raise inflation as quickly as possible”. The ECB President then went on to say that they “will not ignore the fact that inflation has been low for some time.” As a result the market is now pricing in an increase in stimulus and a possible cut to the deposit rate, hence the weakening of the single currency.
Geopolitical tension in Europe continues to escalate. It is too early to determine the lasting effect that this could have on the region. There has already been reports in Asia from tour operators, that the number of cancellations for European holidays continues to grow. This will only increase the probability of the ECB taking decisive action at next week’s meeting.
Meanwhile, US data continues to tread water as the PMI manufacturing and pending home sales both slightly missed expectations. Due to the hawkish rhetoric from FOMC members this did little to the US Dollar.
US’s preliminary reading will be the main focus of the day. The second reading is forecast to post 2% tomorrow afternoon. We also have US consumer confidence where we will gain an insight into the financial confidence of the average US household. In the morning, the German Ifo business climate is released and forecast to increase slightly to 108.3. Meanwhile the UK Q3 inflation report is likely to echo the same dovish tone of the recent BoE commentary. However, after Deputy Gov. Broadbent comments regarding the market’s late expectation for lift off in UK rates, there is an outside chance of a slightly less cautious tone. Growth for the UK could be very much dependent on the Autumn Statement from Chancellor Osborne tomorrow.