Daily Market Report 04/10/12

In recent weeks investors have shown a resemblance to an agoraphobic. Stepping out into the wide world on the allure of outside rewards, they quickly retreat back to the safety and familiarity of the dollar, the world’s reserve currency.

The greenback’s strength yesterday came despite its own positive data, which showed better than expected Non-Manufacturing PMI and Non-Farm Employment. Ordinarily positive US data sparks risk appetite abroad, however this time with either negative, flat or slowed data across the world, the dollar functioned as refuge.

Today the ECB and Bank of England meet in their respective regions to, as the broad consensus suggests, opt to keep interest rates at the current levels. News that Europe’s banks have raised more than €200bn fresh capital, helping them to withstand the current crisis, led to early rallies this morning. Whilst in the afternoon, if Draghi’s words hold strategic substance, the markets could rally. Spanish bond auctions will also provide a litmus test as to the nation’s current conditions.

With the UK’s stimulus program coming to an end, the Bank of England must decide whether the damage of economic stagnation or that of rising inflation is a greater threat to the economy. The former may provoke another round of QE to fall in line with other major central banks, whilst the latter would prompt Mervyn King to hold off on further action, for now at least.

Meanwhile back in the US unemployment claims are expected to rise to 371k, bringing with it an increase in the jobless rate to 8.2%, moving further from the Fed’s QE3 mission plan of reducing unemployment. However all ears will be to Draghi’s comments as the euro’s central role in the news continues.

 

Today’s Key Announcements:
  • Tentative – EUR – French 10y Bond Auction
  • 12.00pm – GBP – Asset Purchase Facility
  • 12.00pm – GBP – Official Bank Rate
  • Tentative – GBP – MPC Statement
  • 12.45pm – EUR – Minimum Bid Rate
  • 13.30pm – EUR – ECB Press Conference
  • 13.30pm – USD – Unemployment Claims
  • 15.00pm – USD – Factory Orders
  • 19.00pm – USD – FOMC Meeting Minutes

See previous Daily Market Reports