Today sees the monthly ECB decision on whether to raise interest rates. To say a rate hike would be surprise is a huge understatement as nothing is expected this year and the number of people who believe that this will happen in Q1 2015 is decreasing. As such, it should not impact the markets.
The main news from last night came from the latest minutes of the Federal Reserve. Interestingly, the Fed voiced concerns over the high levels of the US Dollar particularly against the Euro, Yen and Sterling. This could affect the level of US exports and therefore economic growth. Fed members are also wary of the global slowdown, feel inflation will gradually move back towards its objective over the medium term and that labour market conditions will continue to improve. These rather cautious words led to weakness in the US dollar.
We will also hear Mario Draghi speak today as he tries to talk up the economy despite the backdrop of further weak figures from Germany. Exports fell more than expected and the trade balance was down due to the continuing conflict in Russia and domestic problems. The Euro already feels oversold so there was no huge movement. If this continues, we will need to re-visit the unconventional measures discussion that was all the rage a few months ago.
Lots of news out today with the headliners being the BoE rate decision and Draghi’s speech. We also have jobless claims from the US and minutes from the latest Bank of Japan MPC meeting.