The Markets await More News
Good morning and welcome to a busy week on the data front. There’s some US fed manufacturing reports out today and also German IFO and Eurozone CPI numbers. The market will also pay close attention to what Fed Chair Janet Yellen has to say in her testimony to the US Senate on Thursday with regards to the pace of the tapering programme, and also for any hints as to whether she puts a time frame for an eventual hike in the Fed Funds rate. The coming week will also see plenty of other Fed board members speaking, promoting their own views on tapering and thus could cause the odd spike in either direction.
Friday’s US Home Sales saw a drop of 5.1%, which is the lowest level since July 2012, continuing the run of soft US data although the markets did take into account the perception that this was weather related.
ECB President Mario Draghi reiterated that the ECB were willing and ready to take any action in case these risks of deflation were to gain strength. Concern over the situation in the Ukraine also weighed against the Euro. As we know, markets do not like not knowing what is happening and whether the Eurozone will help.
In the UK, Mark Carney said a new phase of forward guidance is intended to give assurance that officials will support the economic rebound and that they will not take risks with the recovery. He reiterated the need for a more complicated forward guidance then the one originally used which was linked to the unemployment rate.
There were also more hints dropped over the weekend that when the interest rates do eventually rise, this will be done in a gradual and limited fashion.