The Storm After The Calm
After yesterday’s calm we see the markets face a relative storm today as we have data coming out of everywhere. The market is jittery and Sterling is suffering at the moment as the overriding sentiment is very bearish which means if nothing is happening then Sterling will weaken.
The once much heralded rate hike in the UK seems a long way away and now we pin our hopes on better than expected macro data to breathe life into the currency.With the rate hike on the backburner Mark Carney will be keeping an eye on US Dollar strength as the depreciation in the exchange rate raises the risk for imported inflation. Similarly, Carney has hinted that the state of the global economy and developments in the eurozone would also be taken into account when deciding on rates.
Lots of data out of the Eurozone today and the markets will be looking at the German ZEW confidence survey closely as a very poor figure is expected, putting further pressure on the Euro and further dampening hopes of a recovery.The current state of the Eurozone and the record low interest rates are also turning Japanese investors away as they look instead for better returns from the US.
We also see Mario Draghi’s bond-buying plan to save the Euro go on trial before the EU’s top judges today. The ruling is expected to be positive for Draghi as a ruling saying the ECB’s outright monetary transactions mechanism isn’t in line with the EU treaty would probably spell the end of the Euro. As always, the detail will be in the small print.
Today we have UK CPI headlining this morning alongside the German ZEW confidence survey. We also have CPI from Italy, Spain and France, PPI from the UK, industrial production from the Eurozone, the continuing meeting of Eurozone finance ministers and US monthly budget statements.