Quiet start to a busy week
Currencies Direct March 31st 2014 - 2 minute read
This week starts quietly on the data front but ends with lots of
important releases to digest. Today the only figures of note are
Eurozone CPI which are important because of the impact it may have
on Thursdays ECB monthly interest rate decision. Continuing
disinflation is a problem for the ECB, which is why board members
keep talking about negative rates and outright QE. Outright
deflation must be concerning the
ECB more than they are letting on because last week the head of
the Bundesbank (the German central bank) Jens Weidman stated QE was
not off the table for the ECB. This statement is noteworthy only
because it is coming from the single currency’s inflation hawks in
Germany, which is as large a U-turn in stance as we’ve seen since
the ECB announced its OMT program in 2011.
The RBA will meet to set Australian interest rates early
tomorrow morning London time, with the Aussie dollar very sensitive
to any deviation from forecast that rates will remain on hold for
the foreseeable future. Later on Tuesday, US ISM manufacturing is
due with a small month-on-month increase expected.
The Bank of
England meeting is set for next week, so it is left to Mario
Draghi to keep the FX market on its toes on Thursday. Even if we
see inflation fall further it is likely that the ECB will continue
with its current policy of reaffirming forward guidance and
threatening negative rates, rather than actually implementing
anything new. However we’ll be looking for a change in tone about
QE after the Germans finally changed their stance. Further dovish
overtones by Mr Draghi will also see the euro sell off further from
its recent highs.
Finally, on Friday the US non-farm payrolls are released with
the median forecast for 200k jobs created last month.
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