Draghi and Minutes of several major economies up next

What a disappointment this week has been: exception made by Pound, little action was seen across the board. Indeed, the UK was the economy that more attention gathered these last few days, with Wednesday’s key fundamental readings triggering a selloff in the local currency.

A tepid employment report showed growth in wages overtook inflation for the first time in years, rising by 1.3% in the year to September, albeit unemployment rate and jobs creation remained subdued. Following the reading, the BOE published its quarterly inflation report: with inflation at a 5-year low of 1.2%, the BOE also downgraded the outlook for inflation, seeing it below 1% in the next six months, also predicting it will slowly rise to normal over the next three years. Translation for forex traders: forget about a rate hike in the UK during 2015. The GBP/USD pair sunk to fresh year lows in the mid’ 1.56, and shows no aims of turning back higher.

Early this Friday, German and EZ GDP and inflation readings came in line with current European situation: from weak to doom. The only positive note came from GDP readings, as German one shown a 0.1% growth in the third quarter, and French economy grew by 0.3%, slightly above expected. But EZ inflation failed to achieve the expected 0.4%, and held at its sad lows of 0.3%. 

In the US, there were no significant readings these last days, with weekly unemployment claims ticking higher up to 290K in the week ending October 31st, and Retail Sales up 0.3% after being flat in September, supporting a quick dollar run against most rivals, in line with the dominant trends.


The calendar will be a bit more active next week, and hopefully major pairs will find a reason to set more directional moves. Nevertheless, don’t expect the background picture to change dramatically: the US is the leading economy these days, the one with more chances of being the first to tighten its economic policy amid sustained growth. 

These are the fundamental releases to pay attention to:

Monday European opening, ECB President Mario Draghi is due to testify on Monetary Policy before the Committee on Economic and Monetary Affairs, in Brussels. Super Mario had made it clear that the ECB is open to embarking on new measures to fight deflation if needed, beyond current covered bonds and asset-backed securities purchases, so actually, no surprise should be expect from upcoming event. The European Central Bank has been doing too little too late, and last ditch efforts as of now had only helped to keep the local currency subdued, but it will take long to see the effects if they are, in inflation. 

On Tuesday, it will be the turn of RBA, with the Minutes of the latest meeting, when the Australian Central Bank left its benchmark unchanged at 2.5%, followed by a speech from Governor Stevens: according to his latest view, in Australia most data are consistent with moderate growth in the economy but overall, the Bank still expects growth to be a little below trend for the next several quarters: Stevens down talking is an attempt to keep Aussie near the idea target of 0.85 against the greenback, but a slightly positive tone should give the local currency a boost. 

Also GBP inflation readings are scheduled for 9:30 GMT, and ZEW survey for Europe at 10:00 GMT. For the first, a tick higher can trigger some profit taking and an upward correction in GBP/USD, although a decline will confirm market sentiment towards a rate hike in the UK, and see an extension of the downward trend. For the second, ZEW readings are expected to tick higher, bringing some relieve to EUR, yet any recovery will be seen by market as a selling opportunity. 

Wednesday attention will be focusing on BOJ monthly economic policy meeting and GBP Minutes. In Japan, attention is focused more on the possible delay in the tax hike than in Minutes, as there were denials, and denials of the denials for most of the last few days.  If the consumption tax is finally delayed, market will see it as some further way of stimulus, and therefore yen should continued edging lower. BOE Minutes will be uneventful if votes remain unchanged, yet it the 2 dissidents that voted for a rate hike during last months’ go back to vote for a no-change, Pound will continue to sank.

Later that same day, the FED will be also releasing the Minutes of its latest meeting, and market attention will focus on any tiny wording towards a rate hike, but don’t put much hope on it: Yellen & Co. are not expected to maintain a discretional stance towards clarifying when rates will be raised.  Thursday, US inflation will need to show a strong improvement to favor the greenback, as despite the improvement in other sectors of the economy, inflation monthly basis has been among the biggest disappointments in the US.

The week will end as it starts, with  Draghi hitting the wires, due to speak at the 24th European Banking Congress "Reshaping Europe," in Frankfurt; whilst he is not scheduled to give any lead on the upcoming ECB movements and it could end up being  a non-event, there’s always a possibility he throw a shocking line, like he did a couple months ago, so staying out of EUR crosses until he is done would be the smartest move.