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September 2017

All eyes on European Central Bank announcements this afternoon

Published: Thursday 07 September 2017

  • All eyes on European Central Bank announcements this afternoon
  • Australian retail sales disappoint
  • Shock Canadian interest rate decision boosts CAD
  • UK house price index results better than expected
By Rachael Kinsella
 
Australian retail sales failed to grow at all in July and the June figure was also downgraded  to just 0.2%. Aussie consumers were still spending on dining out, but clothing and department store sales fell. These figures are at odds with recent consumer data, but must be a worry for the Reserve Bank of Australia as they eye the strengthening Australian Dollar and a worryingly strong housing market. The Australian Dollar had a volatile night, but hasn’t altered its overall position against the Pound or the US Dollar.
 
Canada’s central bank made a surprise interest rate decision that caught markets off guard and has left the Canadian Dollar at 11-month highs against the US Dollar, hovering around 1.21 initially, then to around 1.22 at the time of writing. Markets expect this to be the last major monetary policy move for a while, following a number of shock decisions in 2017.
 
In the UK, the latest house price index showed better than expected 1.1% growth for August – the strongest performance for eight months. Month-on-month figures were also an improvement, up to 2.6% from 2.1%. This reflects encouraging residential housebuilding figures from the latest UK construction data, which was the key area of growth for the industry as other sectors stagnated.
 
Positive data for the UK and other European factors have helped the Pound recover some ground against the US Dollar, hovering around 1.30/1.31. Meanwhile, the Brexit Bill debate has started in UK parliament – outcomes of today’s discussions are likely to move the Pound against its key currency pairings; Sterling actually strengthened slightly against the Euro to around 1.09 yesterday in the run up to the debate, so there could be a boost for the Pound yet from any favourable Brexit discussions and decisions.
 
All eyes are on this afternoon’s European Central Bank (ECB) monetary policy announcement and press conference. Speculation has ensued for some time about whether Mario Draghi will announce the winding down of quantitative easing (QE) for the Eurozone, and if so, what happens next? Markets do not have a clear prediction for this: some think the economic stimulus plans may be put back to October. There are differing opinions on whether the ECB will raise or downgrade growth forecasts and what steps they are likely to take in terms of inflation.

Whatever measures are announced could put the Euro under pressure and send ripples across the currency markets. If the ECB cuts its assets purchase facility by more than 20 Billion, the Euro is likely to strengthen. Anything above 30 Billion could mean that the Euro-US Dollar pairing will likely make fresh yearly highs, but if they forgo reducing or tapering the QE programme, then the Euro will trade much lower. The uncertainty continues…
 
Meanwhile, the French President, Emmanuel Macron, visits Greece amid tight security, planning to make a speech on the theme of the future of Europe from the ancient site of Pericles’ renowned funereal address.
Ancient Greece 
  • Have you seen the movies about Greek Mythology? No? Well, you Odyssey them.
  • What did Poseidon say to the sea monster? What's Kraken? 
  • What breed of horse was the Trojan horse? A nightmare. 
(Thanks to http://www.jokes4us.com/miscellaneousjokes/worldjokes/greecejokes.html)

Today's Major Economic Release

Market BST Data/Event Previous Expected
EUR 10:00 EU: Revised Gross Domestic Product 0.6% 0.6%
EUR 12:45 European Central Bank Minimum Bid Rate 0.00% 0.00%
CAD 13:30 Canada: Building Permits 2.5% -1.5%
EUR 13:30 European Central Bank Press Conference    
USD 13:30 US: Unemployment Claims 236k 245k
USD 13:30 US: Revised Non-Farm Productivity 0.9% 1.3%
CAD 15:00 Canada: Ivey Purchasing Managers' Index 60.0 61.3
USD 16:00 US: Crude Oil Inventories -5.4m 4.1m
NZD 23:45 New Zealand: Manufacturing Sales 2.8% 2.8%
 

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