German Officials Shed Doubt on ECB Excitement
As anticipation builds for Thursday’s European Central Bank meeting, where we could more hear details about the possible debt purchasing program, German officials have been reminding the markets not to set expectations too high. Finance Minister Wolfgang Schaeuble warned against placing too much faith in the ECB plan, as the bank’s mandate doesn’t allow it to finance state budgets. Therefore, Schaeuble said not to expect a decision that is not within the ECB’s mandate.
In fact, neither Spain nor Italy has officially requested a bailout, as is required for the ECB to start buying their sovereign debt, thereby furthering Schaeuble’s plea not to have false expectations. Merkel said today that she is confident that the ECB is working within its mandate, again refraining from specifically commenting on the possible bond purchasing plan. However, a government spokesman did say that Euro-bonds are not a goal and reiterated support for Bundesbank head Jens Weidmann.
Regarding Greece, an EU spokesman said the Troika will restart meetings on Wednesday. Also, the spokesman said the EU will hold a summit to discuss the EU budget for two days starting on November 22.
However, the only piece of news that moved markets today was a better than expected UK Purchasing Managers’ Index for manufacturing. Meanwhile, the Euro-zone PMI for manufacturing was revised 0.2 lower from an initial estimate for August.
GBPUSD jumped 30 points following the release of the UK PMI and stopped just short of the key 1.5900 line. Support could be provided around 1.5845, by a month-long upward trend line.
The US stock market will be closed today for Labor day, so expect lower volatility during the North American session.
GBPUSD 1-hour: September 3, 2012
--- Written by Benjamin Spier, DailyFX Research
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