Daily Market Report 05/10/12

The ball is in Spain’s court, and it’s Rajoy’s turn to serve, at least as far as the European Central Bank is concerned.

Yesterday in the eagerly anticipated ECB press conference, Mario Draghi made it unequivocally clear that the central bank is ready to roll out the Outright Monetary Transactions. Draghi also praised Spain’s fiscal alignment, inferring that the troubled nation could already qualify for the ECB to begin purchasing its short-term debt.

Alerting the world that he is primed to take action, Draghi’s message resonated across currency markets, which once again prompted investors to leave the comfort of save haven America. Eurodollar, the most voluminously traded pair, reached a two-week high, whilst the euro also finished up on the day against the majority of its peers.

Both the Bank of England and ECB opted to keep rates at their historic lows, with Mervyn King also hinting that the UK’s QE program could extend a further £50bn next month.

If the trend following Draghi’s previous announcement holds true, the euro may be in for another purple patch. This, however, is likely to be temporary, lasting until the anti-depressants wear off as investors sober to the euro zone’s economic prospects.

Already this morning, Greek leader Samaras has exposed that the nation has only the liquidity to last until the end of November. Survival beyond this point is pendant on being granted a third tranche of bailout funds.

In the US today, unemployment figures are released. Expected to be higher than previous at 8.2%, and one of the key debating points in the Obama/Romney saga, there are signs that the Fed’s QE3 asset buying may thus far be proving insufficient to spur the economy.


Today’s Key Announcements:
  • Tentative – JPY – Bank of Japan Press Conference: BoJ kept rates at the same level, and opted not to increase its stimulus program
  • 10.00am – EUR – Final GDP: expected to remain in contraction at -0.2%
  • 11.00am – EUR – German Factory Orders: expected contraction
  • 13.30pm – USD – Non-Farm Employment Change: expected to increase to 114k
  • 13.30pm – USD – Unemployment Rate: anticipated increase to 8.2%

See previous Daily Market Reports