The words spoken by the Head of the European Central Bank yesterday are
still being parsed for meaning but a standout already is that the overriding
concern of the ECB is now inflation, or to be more precise, the lack of it.
Senor Draghi referred more than once to the bank’s mandate being the control of
price stability, in both directions, and of the need to ensure that inflation
expectations are “anchored”. This is central banker speak for saying that not
only must inflation not be too high, it cannot be too low either, and the
available data must point to this state of affairs continuing into the future.
Right now Euro zone inflation is way too low, at an annualised rate of 0.7%, when the ECB’s policy is to have it “close to but not above 2.00%”. The accepted measures to deal with this, a lowering of the target interest rate or anything approaching what might look like European style Quantitative Easing, are all totally unacceptable to many in
Nevertheless, it behoves those of us with an interest in Foreign
Exchange trading to keep a good eye on Euro zone inflation figures.
Today is Non-Farm Payroll day
in the US
Once again, the figures on payrolls from the US Bureau of Statistics are
eagerly awaited by the markets when they are announced later in the Global day.
All indications are that they will be good, in the sense that more people are
being employed, which will heighten the probability for an end to QE in the US . This will
tend to strengthen the US dollar but the market reaction at the time of issue,
which is 1:30 PM GMT, or 8:30 AM on the Eastern seaboard of the United States ,
is likely to be chaotic in the very short term.
As previously noted, many times, entering the market under these
conditions can be detrimental to the maintenance of a healthy Forex account
equity. For this reason we will be keeping our powder dry until we see the
reaction of the market to whatever transpires.
No comments:
Post a Comment