Focus Shifts To The US
There were no major surprises yesterday as both Mark Carney and Mario Draghi ensured that interest rates for the UK and the Eurozone remained on hold. As always, it was what Draghi said in his press conference after the announcement that provided more interest to the markets.
Draghi reiterated the central bank’s forward guidance of keeping interest rates at present or lower levels for an extended period of time and confirmed that the economic recovery in the Eurozone was progressing as predicted. He predicted inflation would stay low for a prolonged period, before returning to the ECB’s objective of 2% in the medium term. As always, the ECB stated that it would intervene if necessary.
Furthermore, Mario Draghi pointed to the uncertainty in emerging markets as a risk for the Eurozone recovery. He counted weak domestic demand and a slow implementation of structural reforms by some of the EU national governments among other risks.
Overall EUR strengthened as market participants who had priced in a policy move readjusted their positions.
German trade balance data released this morning once again showed a decline in German imports, down 0.6 percent after an expected 1.2 percent climb. However, exports also decline
d by 0.9 percent, increasing the German trade surplus to EUR18.5bn.
In the US,non-farm payroll numbers will dominate. Consensus expectations are for a strong print at 185k, though recent momentum suggests there may be further upside. A revision of last month’s unexpectedly weak numbers could be more of a driver for a dollar surge than a marginal increase on consensus expectations for January.