Four years on Draghi’s still having to do “whatever it takes”
The UK industrial production data was much weaker than expected with a 1.3% decline for October. This was the sharpest fall for four years and followed a 0.4% drop the previous month. Sterling fell on the news, but there was support just below the 1.2580 level against the Dollar and the Pound held above 1.1705 versus the Euro.
The NIESR GDP growth estimate printed at 0.4% in the three months to November, unchanged from previous figures. NIESR added that it expects that consumer spending growth will slow as higher inflation outstrips the growth in wages.The UK RICS index recorded an increase to 30 for November from 23, the strongest reading for seven months, which maintained near-term confidence in the housing sector.
The Italian President has refused to accept Prime Minister’ Renzi’s resignation for a second time, but discussions will continue over the next few days, adding to political uncertainty. Moody’s has downgraded Italy’s credit rating outlook to negative, from stable, with further underlying concerns over medium-term stability.
Today’s main event is undoubtedly the European Central Bank’s (ECB) Monetary Policy Announcement and Mario Draghi’s press conference. Inflation is running well below the ECB’s just-under-2% target. Despite previous rumours of tapering the Asset Purchase Scheme, the consensus is that the ECB will announce a six month extension at EUR 80bn a month, although there are other options and potential technical changes. The Euro continues to gain some support ahead of the decision and Draghi’s press conference, with the single currency edging towards 1.0770 against the Dollar with a risk of high volatility later in the day.
The US job-openings data printed in line with expectations at 5.53mn for October, a rate of 3.7%. There was also an upwardly-revised reading of 5.63mn for the previous month which maintained confidence in the labour market, but a rate hike is already fully priced in. Delving further into the data, the number of job vacancies advanced 2% over the past year, while hiring decreased 2.2%, suggesting that employers face difficulties in finding skilled workers. The low unemployment rate may force businesses to raise pay to attract workers in future.
Data to watch: UK Supreme Court hears Government-Parliament Brexit Appeal; 12:45pm ECB Interest Rate Decision and Deposit Rate Decision; 1:30pm ECB Monetary Policy Statement and Press Conference.