Draghi Takes Centre Stage
Last week provided lots of interesting movement for the markets as Europe and Greece continued talking and the Federal Reserve made the much anticipated move of removing the word “patient” from their forward guidance. All this caused major intra-day swings in the currency markets and volatility is becoming the norm.
This week, we shall see talks between Greece and Eurozone ministers continue, with Greek PM Tsipras meeting with Angela Merkel today. There is an air of positivity around this meeting as Merkel has been willing to compromise a little more than her German colleagues as of late. Although this will be dependent on whether the Greeks come to the table with some more concrete proposals for structural reforms.
In other European news, the stage is set for Mario Draghi to address the European Parliament’s Economic and Monetary Affairs Committee in Brussels today. As ever, we are looking for a bit of an insight into what effect Draghi believes QE will have and what he makes of the decrease in the value of the Euro. With recent data from the Eurozone being a bit more positive, it will be interesting to see whether Draghi is a bit more upbeat. There is of course the shadow of high unemployment and the continued rise of far right anti-austerity parties throughout Europe to temper this optimism.
In the US, we had an extremely volatile week after the removal of “patience” was countered by a downgrading of GDP and inflation forecasts. This caused the US Dollar to weaken although it has since started to recover some of its losses. There is certainly the thought that not raising rates quickly is a much better solution than raising rates too quickly and then having to undo these measures. The reality is, however, that the US will still be the first country to raise rates, it’s just a matter of when.
Today, Mario Draghi’s speech takes centre stage with Euro consumer confidence being released this afternoon along with some US home sales data.