Euro May Face Volatility Despite ECB Inaction

2016-09-08 05:40:00

Talking Points:

ECB unlikely to expand stimulus effort at September meeting
Updated economic forecasts may foreshadow policy direction
Changes in QE-eligible asset mix may trigger Euro volatility

The ECB monetary policy announcement headlines the economic calendar in European trading hours. Euro area financial conditions have stabilized having recovered from stress in the aftermath of the UK “Brexit” referendum. Meanwhile, the year-on-year inflation rate has drifted toward the top the range prevailing since mid-2015 having steadily improved since April. On balance, this hints that policymakers probably don’t feel pressured to expand an already aggressive monetary stimulus effort that includes hefty asset purchases and a negative deposit rate.

The announcement may still generate volatility however. First, the updated set of macroeconomic projections prepared by ECB staff may be telling, with the direction of revisions hinting which way the central bank may steer in the months ahead. A downgrade of the inflation outlook may imply that further easing is on the horizon and weigh on the Euro. Needless to say, an upgrade that undermines the case for near-term stimulus expansion could have the opposite effect.

Second, investors will look for clues about potential changes in policy implementation as ECB President Draghi gives a press conference following the announcement. The central bank is soaking up so much paper as to spark concerns about insufficient liquidity in those assets it has deemed acceptable for purchase. If policymakers’ promise to boost accommodation as needed is to be seen as credible, they may need to expand the range of securities that qualify. Doing so or signaling such a step is imminent may be enough to put pressure on the single currency.

Are retail traders buying or selling the Euro ahead of the ECB announcement? Find out here !

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:55	AUD	RBA's Lowe Intro Remarks at Conference	-	-	-
23:01	GBP	RICS House Price Balance (AUG)	12%	2%	5%
23:50	JPY	BoP Current Account Balance (¥) (JUL)	1938.2B	2073.3b	974.4b
23:50	JPY	BoP Current Account Adjusted (¥) (JUL)	1447.8B	1573.7b	1648.4b
23:50	JPY	Trade Balance BoP Basis (¥) (JUL)	613.9B	571.2b	763.6b
23:50	JPY	GDP SA (QoQ) (2Q F)	0.2%	0.0%	0.0%
23:50	JPY	GDP Annualized SA (QoQ) (2Q F)	0.7%	0.2%	0.2%
23:50	JPY	GDP Nominal SA (QoQ) (2Q F)	0.3%	0.2%	0.2%
23:50	JPY	GDP Deflator (YoY) (2Q F)	0.7%	0.8%	0.8%
23:50	JPY	GDP Private Consumption (QoQ) (2Q F)	0.2%	0.2%	0.2%
23:50	JPY	GDP Business Spending (QoQ) (2Q F)	-0.1%	-0.4%	-0.4%
23:50	JPY	Bank Lending Incl Trusts (YoY) (AUG)	2.0%	-	2.1%
23:50	JPY	Bank Lending Ex-Trusts (YoY) (AUG)	2.0%	2.0%	2.1%
01:30	AUD	Trade Balance (JUL)	-2410m	-2700m	-3250m
02:00	JPY	Tokyo Avg Office Vacancies (AUG)	3.90%	-	3.94%
02:35	CNY	Trade Balance (CNY) (AUG)	346.03b	373.00b	342.80b
02:35	CNY	Exports (CNY) (YoY) (AUG)	5.9%	2.9%	2.9%
02:35	CNY	Imports (CNY) (YoY) (AUG)	10.8%	0.7%	-5.7%
02:41	CNY	Trade Balance ($) (AUG)	52.05b	58.85b	52.31b
02:41	CNY	Exports ($) (YoY) (AUG)	-2.8%	-4.0%	-4.4%
02:41	CNY	Imports ($) (YoY) (AUG)	1.5%	-5.4%	-12.5%
04:30	JPY	Bankruptcies (YoY) (AUG)	14.87%	-	-9.52%
04:30	JPY	BOJ’s Nakaso Speaks in Tokyo	-	-	-
05:00	JPY	Eco Watchers Survey: Current (AUG)	45.6	45.5	45.1
05:00	JPY	Eco Watchers Survey: Outlook (AUG)	47.4	46.4	47.1

European Session

GMT		EVENT	EXP	PREV	IMPACT
06:00	EUR	German Labor Costs (YoY) (2Q)	-	3.1%	Low
06:00	EUR	German Labor Costs (QoQ) (2Q)	-	1.7%	Low
11:45	EUR	ECB Main Refinancing Rate (SEP 8)	0.00%	0.00%	High
11:45	EUR	ECB Deposit Facility Rate (SEP 8)	-0.40%	-0.40%	High
11:45	EUR	ECB Marginal Lending Facility (SEP 8)	0.25%	0.25%	High
11:45	EUR	ECB Asset Purchase Target (SEP)	€80b	€80b	High
12:30	EUR	ECB President Draghi Holds Press Conference	-	-	High