Daily Market Report 10/06/16


Yesterday Mario Draghi took the opportunity to urge European governments to play their part in boosting economic growth and inflation. Speaking at the Brussels Economic Forum, the ECB chief highlighted the importance of the fiscal policy and warned the lack of this fiscal interference from governments is making the ECB’s job harder saying ‘if other policies are not aligned with monetary policy, inflation risks returning to our objective at a slower pace’.

Over the past years the ECB has provided various forms of monetary stimulus ranging from negative interest rates to more than a trillion euros of bond purchases; however their efforts have fallen short of the inflation target of just below 2%. This is not the first time Mr Draghi has mentioned fiscal policy which points toward his concerns of hitting a glass ceiling with what can be done with the monetary policy.  


The dollar yesterday posted gains following a better than expected unemployment claims figure. The figure was printed 264k against a previous of 268k which caused the dollar index to rebound from five week lows set on Wednesday.

Analysts are expecting the dollar to hold a very narrow range moving in to next week in anticipation of the two day Federal Reserve meeting which will take place across Wednesday and Thursday. It is widely expected, that given the uncertainty surrounding the Brexit and the potential systemic ramifications of a Brexit; the FED will not be raising interest rates. However, market participants will be firmly focused on any indication on what indication the Fed provides regarding their outlook for another rate hike.  


Sterling again slipped on Thursday as investors ditched riskier assets in favour of more safe haven currencies such as the Japanese Yen. Due to  ever growing concerns over the Brexit referendum which takes place in two weeks’ time. With so much uncertainty over the results of the referendum on the 23rd of June, economic data has taken a back seat in regards to market movement.

The latest odds from Betfair show the implied probability which refers to the conversation of odds to a percentage showing a remain vote has risen to almost 76 percent yesterday which is up from an implied probability of around 72 percent earlier this week. Nevertheless, with Brexit polls each painting very contradictory pictures; much more uncertainty is forecast over the next two weeks for the Pound.


Key Announcements

15.00 – USD: University of Michigan Consumer Sentiment forecast at 94.1 against previous of 94.7