Markets ignore Draghi and Yellen speeches
Yesterday was relatively quiet for the Pound – it was trading within 25 pips either side of 1.1600 against the Euro and within 30 pips of 1.3020 versus the Dollar.
The Bank of England’s Deputy Governor Minouche Shafik commented that it was likely that a looser monetary policy for the UK was likely to be required. According to Shafik, the timing of any changes to quantitative easing or interest rates would depend on continual analysis of economic data, but it would “help ensure a slowdown in economic activity does not turn into something more pernicious”.
In Europe, German press report that Bafin, the banking regulator, is working on a contingency rescue plan for Deutsche Bank. Any benefit the Euro might have seen from this news was offset by a strengthening in risk appetite after the OPEC deal to curb oil production.
European Central Bank (ECB) President Draghi locked horns with German politicians yesterday as they criticised the ECB’s monetary policies. Draghi denied low interest rates have caused the problems for “German financial firms”. He reiterated a call for Eurozone countries to share the burden of stoking economic growth and also for structural reform and a fiscal boost to support the Eurozone growth outlook.
The August US headline durable goods data beat expectations and showed no drop from July’s figure. There was an increase in core capital good orders which suggested that a tentative revival in capital spending could be underway.
Fed Chair Yellen’s testimony to Congress focussed on financial regulation and the banking sector, with nothing of note on monetary policy. Chicago Fed President Evans remains dovish in outlook, although there were no specifics on potential short-term policy trends. Kansas City President George and Cleveland head Mester hawkishly continued to push for higher interest rates and attempted to keep the option of a November rate increase alive, although market scepticism will remain high.
Data to watch: 9am EUR German Unemployment Rate & Change. 9.30 UK Consumer Credit (Aug), Mortgage Approvals (Aug).1pm EUR German Flash CPI & Flash Harmonized CPI (Year on year & Month on Month). 1.30pm US Continuing & Initial Jobless Claims, Q2 Annualized GDP, Q2 Gross Domestic Product Price. Personal Consumption Expenditures and Core Personal Consumption Expenditures, Goods Trade Balance