Starting
today, the next three days will see a flurry of economic activity on both sides
of the Atlantic that is almost certain to impact all major currencies in the
weeks following. The big ones are the appearance of Janet Yellen, Chair of the
Federal Reserve, before the joint economic committee of the U. S. Senate
tomorrow (Dec 3rd), the ECB monetary policy statement and press
conference, also tomorrow, and the U. S. Non-Farm Payrolls report on Friday.
These will
be intermingled and presaged by a number of seemingly more mundane releases and
speeches, but ones that will be minutely examined for clues as to what will
happen next both in the ECB and the Federal Reserve. They include the flash
report on Harmonised Index of Consumer prices (HICP) for the Eurozone today,
Wednesday, and the ADP jobs report, also today, which is normally seen as a leading
indicator of what the Non-Farm Payrolls report will bring at the end of the
week.
Also today,
Janet Yellen gives a speech to the Economic Club of Washington. This is not
expected to deal with interest rate rises, but rather to possibly concentrate
on the future path of further rises once the cycle of U. S. increases starts.
ECB is the wild card in these
interesting times
While the
start of U. S. rate rises is now a racing certainty at the next FOMC policy
statement on Dec 16th, what the ECB will do tomorrow is more indefinite.
Mr. Draghi, as is often the case, finds himself in a position where he must use
rhetoric rather than concrete action to attempt to raise inflation (and lower
the Euro). This is because of the very strong opposition coming from Germany
for measures such as additional Quantitative Easing (QE). Right now the
president has convinced the markets that he will ease further but if he does
not, there is such a pent-up pressure in bets on Single Currency weakness that
the outcome for the EURUSD pair could well be a very significant surge to the
upside, driven by short-covering.
Interesting
times.
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