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Another round of QE for Europe?

An eerie calm has settled over the market this morning, just ahead of this morning’s ECB press conference and tomorrow’s US jobs report. Earlier this morning, European policy makers left rates unchanged – as expected – but this morning’s 830am press conference should garner some attention amid some overnight reports. Various news agencies are leaking the possibility of QE2 in Europe, well ahead of next October’s QE1 conclusion, and those rumors seem to weighing on the euro as a result. Tomorrow, we get a look at the August non-farm payrolls report in the US and it is expected that 216k Americans began new jobs. The US dollar is fairly mixed as we go to print this Thursday morning.

The overnight Asian session was very quiet, with only some BoJ comments eliciting attention. Bank of Japan member Kiuchi noted domestic inflation would not the desired 2% level in the short term without further action, although the yen strengthened a bit none the less. Finding a bit of old-school safe haven status as Chinese shares slumped another 1% lower. Chinese markets are closed Thursday and Friday for public holiday, which has to be welcomed by the West with such important economic data to be released. Finally, some interesting comments from the IMF overnight, warning global central banks to refrain from raising interest rates. The IMF commented that downside growth risks have increased and echoed sentiment the ECB should begin to consider another round of QE and the BoJ should also leave the door open to further easing. With only two weeks to the FOMC meeting, these comments are very, very telling.

Here in North America, things will actually kick off shortly with the 830am ECB press conference. On the docket for the US, weekly jobless claims headline a busy slate, with July Trade Balance, ISM Services, Manufacturing and Non-Manufacturing PMIs to follow. This week, it is anticipated that American employers shed 273,000 workers – which comes one day before the hotly anticipated August non-farm payrolls report. As we edge closer to this month’s FOMC policy meeting (Sept. 16-17), these labor results become more and more important, as the market seeks any indication towards a definitive rate hike. Concerning ISM’s PMI results, all will be centered around the 55 level, promoting strong US economic growth. There will be much attention to be paid to the prices and employment aspects of the non-manufacturing results.

In Canada, July Balance of Trade will be unveiled at 830am and a significant deficit is anticipated, following a steep decline in energy export prices.Tomorrow, Canada will release their own August jobs report and it is expected that 7.3k new roles will have been created. At 10am EST, the Ivey Purchasing Managers Index will be unveiled, which illustrates the level of business confidence. Amazingly, “54” is expected, showing economic growth and renewed optimism in the business sector. The Loonie was sold on Wednesday following another decline in oil and commodity prices. Next Wednesday, the Bank of Canada convenes for their next policy meeting and much will be debated in the days leading up the meeting. The CAD remains a sell on rallies but volatility should increase sharply over the next twenty four hours.

Further reading:

ECB leaves rates unchanged – on to Draghi

ECB Preivew: Draghi to join currency wars? 4 scenarios