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Market awaits ECB after the Euro surges higher

Last week we saw the Euro make gains across the board as the speculation for further QE lessened as economic data improved. In Q4 last year we saw the Euro lose ground against a basket of currencies as the market speculated that parity could be reached against the US Dollar. The ECB took action and introduced stimulus in December but did less than expected which resulted in the single currency retracing some of its losses. The Euro strength has continued this year as economic data has pointed to the upside damping thoughts of additional QE.

Meanwhile, Sterling remained on the back foot as the minutes painted a dovish picture. The vote to keep rates on hold was 8-1 as McCafferty once again kept his voice to raise rates despite the drop in oil. Meanwhile, the minutes went on to say that growth and inflation were weaker in the near term.  They also stated that volatility underlines downside risks to global growth and that pay growth will be restricted. This has ultimately strengthened the case for no lift off in 2016.

US data was in general softer as Retail sales, Producer inflation, Manufacturing and Industrial production all missed expectations.

Watch our currency round up with Global Reach Partners’ Head of Trading Jamie Jemmeson, as he reviews last week’s market news: 

Monday 18th January 2016

Markets will be relatively subdued today as the world’s largest economy is closed in observance of Martin Luther King Day. 

  • US Bank Holiday (Martin Luther King Day)

Tuesday 19th January 2016

Inflation on a global basis has been under scrutiny as oil prices continue their slide. Today the UK’s inflation will be under the microscope and will potentially put a further nail into the coffin of these speculating for an early rate hike. The headline inflation figure is expected to remain close to anaemic levels at 0.1%. In Germany the ZEW survey is set for release, given the recent trend in data, the market will be hoping for a positive number.   

  • UK Inflation data
  • GER/EUR ZEW Survey

Wednesday 20th January 2016

The World Economic Forum is due to start in Davos which was attended by central bankers, prime ministers, finance ministers, trade ministers, and business leaders from over 90 countries. Keep an eye out for headlines surrounding threats to global growth. Meanwhile, UK data once again comes under scrutiny, this time it is the employment data. The average earning, claimant change and unemployment rate are all due for release. Crossing the pond we are set to see the latest reading on inflation and building permits. 

  • World Economic Forum (Davos)
  • UK Average Earning Index
  • UK Claimant Change/Unemployment Rate
  • US Building Permits
  • US CPI

Thursday 21st January 2016

Given the recent strength in the single currency the market will keep a close eye on the ECB meeting today. It has been recently reported that several members of the governing council do not believe that deployment of further monetary policy tools will be required given the improvements in the economy. The market will decipher the rhetoric for clues on course of policy action moving forward. 

  • ECB meeting and press conference
  • Philly Fed Manufacturing
  • US Initial Jobless Claims

Friday 22nd January 2016

Once again the UK is under the microscope. This time Retail sales from the UK are due for release. The tertiary sector accounts for nearly 70% of economic activity in the UK so this will closely scrutinised. In addition we also have the PMI manufacturing and service data from Germany whilst the World Economic Forum continues in Davos. In the US we have another piece of housing data with the release of the existing Home sales. 

  • UK Retail Sales
  • GER PMI Services
  • GER PMI Manufacturing
  • US Existing Home Sales