Draghi No Show Raises ECB Expectation

Stocks in the US fell yesterday as the
consumer confidence index fell by its largest margin in the last 10 months.
While confidence is at a new low, markets will look for some direction after
the US GDP figures which are due to be released later today. The US Dollar has
remained weak in subdued trading this week as investors wait for Fed chairman
Ben Bernanke’s speech at Jackson hole later this week. There is increasing
speculation, that they may announce a further round of quantitative easing, as
the US economy loses confidence.

As for the Eurozone, any expected movements
are likely to be revealed in early September. Also it was revealed that ECB
president Mario Draghi will not be attending the Jackson hole summit, raising
further speculation for the bond buying programme by the ECB. There are reports
that they are willing to buy bonds but with only short term maturities. Draghi
has attributed his absence in attendance at the summit to a heavy work load,
with markets believing that they may announce their plans at an earlier date.
The Euro has consolidated its move upwards since last week reaching a high of
1.26 against the dollar. There has been some news from Spain that the banks in
Catalonia, have sought a €5bn bailout. Spanish prime minister Rajoy, wants the
EU banking union to try and implement plans to set up a single banking
supervisor to cover the Euro area.

There is very little economic data from the
UK and the pound has rallied this week supported by the weakness in the dollar,
aligning with Euro strength. Any clear direction will only be established after
the Jackson hole summit later this week.

Report by Amir Khan