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September 2016

ECB stalls on extending Quantitative Easing

Published: Friday 09 September 2016

  • ECB stalls on extending Quantitative Easing
  • US unemployment claims unexpectedly fell  
Yesterday was relatively non eventful and the European Central Bank meeting failed to add any fireworks. It was a rather muted response to the media conference and the Euro was lifted yesterday by the lack of hints on any possible QE extension from ECB President Mario Draghi. The ECB left policy rates unchanged at 0.25% and the Quantitative Easing program remained at 80 billion Euros per month until the end of March 2017, or beyond. President Draghi kept the door open for further future stimulus, however the markets perceived the message from the central bank as pressuring government to take up the baton to stimulate growth. 

The number of Americans filing for unemployment benefits unexpectedly fell, pointing to a strong, sustained labour market even as the pace of job growth is slowing. Despite these signs of an underlying labour market tightening, wages have not pushed higher raising the question of how much momentum the recovery really has. August's slowdown in job growth, together with sluggish factory and services sector activity could encourage the Federal Reserve to keep interest rates unchanged at the FOMC September policy meeting. The market still remains sceptical on a rate hike and this is evidenced in the Fed Fund futures which are used to indicate the markets predictions for a rate hike which predict a 21% chance for a move in September.

There are encouraging signs that the price of oil might recover. As Iran’s output has stalled in the past three months suggesting Tehran might be struggling to fulfil its plans to raise production to a new high. Iran may be more inclined to come on board with the supply freeze being suggested by Russia and OPEC. The next meeting is at the end of this month and any freeze in output should bode well for commodity currencies especially the Canadian Dollar which is very sensitive to changes in prices of oil.

Bad Date

“Hi Sarah, listen I only have a minute.  I’m about to get picked up for a blind date, can you call me in a half hour just in case it’s going bad? Yes? Ok great! We’ll speak.”

Claire gave herself a quick spray of perfume, checked herself out one more time in the mirror, and headed outside to wait for the guy.

Sure enough after twenty minutes Claire was discreetly checking her watch. After ten more long minutes her phone finally buzzed.

Claire listened for a few seconds, grimly pursed her lips, and turned to her date, “I feel terrible, but my Grandmother is terribly sick, and I must go home now.”

 “No problem!” Said her date with a big grin, “in a few more minutes my dog was going to get run over!”

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: Goods trade balance -12.4b -11.7b
GBP 09:30 UK: Construction output m/m -0.9% -1.0%
GBP 09:30 UK: Consumer inflation expectations 2.0% 2.0%
ALL All Day Euro group meetings    
CAD 13:15 Canada: Housing starts 195k 191k
CAD 13:30 Canada: Employment change -31.2k 16.0k
CAD 13:30 Canada: Unemployment rate 6.9% 6.9%

FX research by Denzil Rickerby

Daily Currency Analysis by Charlie Horsley

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