The markets are looking rather cautious again with all eyes turning to today’s crucial ECB monetary policy decision. The rates decision is at 1245GMT and is expected to show a 10 basis points cut to the deposit rate to -0.40%, whilst Mario Draghi’s press conference at 1330GMT could also contain further unconventional easing measures through adjustments to the quantitative easing program. The market is a little bit more cautious on what Draghi will do this time around as the December meeting showed not to overestimate what the ECB can deliver. Still though, Draghi has been talking up the action and could once more leave himself open to criticism if he fails to deliver again. Wall Street closed marginally higher last night with the S&P 500 up 0.5%, whilst Asian markets were mixed overnight (although the Nikkei was helped by a weaker yen to close up 1.2%). European markets are trading around the flat-line in early trading.
In forex markets there is an air of slight dollar strength which is sweeping across the majors, with the US dollar outperforming across the board. The Kiwi was a big mover late last night in the wake of an unexpected rate cut by the Reserve Bank of New Zealand. In cutting rates by 25 basis points, the RBNZ noted the deteriorating outlook for global growth since December and also noted subdued inflation. There will now surely need to be a pricing in for further monetary easing from the RBNZ. In commodity markets, the gold price continues its slide of the past couple of days and is down another half a percent, as is the oil price.
Overnight there was another factor that traders need to consider with Chinese CPI inflation unexpectedly jumping to 2.3% (1.9% had been expected). Although this may sound like positive news, it is to be taken with a pinch of salt as February is a distorting month with the Lunar New Year and the data is expected to be settle in the coming months. Furthermore, the PPI inflation was in line with estimates at -4.9% which although is on an improving path, is still something which should encourage the People’s Bank of China to engage further stimulus.
Aside from the ECB, the US weekly jobless claims are announced at 1330GMT and are expected to stay around the 275,000 mark.
Richard Perry
Market Analyst. hantecfx.com
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