European equity markets started the day on a positive note ahead of ECB’s latest monetary policy decision.
Traders seems to have come off the roller-coaster, since China is on long weekend break as the country’s commemorates the end of World War Two.
Wall Street also fuelled risk appetite as stocks managed to rally by end of Wednesday’s session on the back of the U.S. Federal Reserve's Beige Book survey, which said most areas of the economy are experiencing solid growth. On the other side lack of inflation in wages and prices suggest demand to remain weak.
Private sector payrolls processor ADP showed 190,000 jobs created in August, slightly less than expected but still considered as a good figure. Investors wanted a clue of how would Friday’s non-farm payrolls look like. Economists are expecting 220,000 jobs to be added to the economy; however, a disappointment could be possible according to history. Between 2011 and 2014 the initial estimate for August payrolls has consistently come in well below consensus to be revised higher in the next two months. Yesterday’s larger than expected drop in Q2 unit labour costs is another worrying sign as it indicates that wages still not growing as aimed by the Fed.
Euro Traders Eyes on ECB
With ECB’s staff forecast expected to be modified, traders are wondering whether they will be getting additional QE.
Last meeting the ECB expected inflation of 0.3% in 2015, 1.5% in 2016 and 1.8% in 2017. However, recent comments from ECB’s chief economist Peter Praet indicated these numbers to be lowered. Inflation figures are not expected to be alerted by much, and pulling the numbers slightly might not need a fast action from the ECB to stimulate the economy through additional QE, although they would like to see the Euro lower. The key question is how Mr. Draghi is looking to calm the markets and probably find a way to put the Euro bears back in control.
The EURUSD is trading in a very tight range today ahead of the awaited meeting, but some traders might continue being on the sidelines preparing their strategy to trades the NFP tomorrow.
Aussie hovering around lowest levels since April 2009
After yesterday’s GDP, which indicated the Australian economy being hit hard by China’s slowdown, today Australian retails sales showed the first drop in over a year. Morning data from the Australian Bureau of Statistics showed retail eased 0.1% in July after a surprise 0.6% jump in June. Today’s retail figure provide another indication of a recession possibility in Australia. Although AUDUSD below 0.7 looks very attractive to Long, it’s possibly not the right time.
Cable trading Below 1.53
The GBPUSD fell for the 8th straight day to trade at lowest levels since June. Although economic data still looks relatively healthy compared to its developed economies peers we can relate the pound movement to the correlation with markets volatility. On the data front we’ll be Markit’s Services PMI, with previous surveys expecting the outcome to be around 57.6 in August, up a bit from July’s 57.4.