After the largely impressive GDP figures from Australia yesterday, the employment data released overnight were far less positive; unemployment unexpectedly jumped to 5.3% (from 5.2%) and the loss of nearly 40k full-time jobs in November was only partly offset by a gain of 33.6k part-time jobs in the same period. Also during the Asian session, we received yet more downbeat data out of Japan which showed machine orders sharply down by -6.9% MoM in October (consensus was looking for growth of +0.5%), and bankruptcies up by 3.2% YoY. Against this backdrop, equity markets have had an underwhelming day, with most of the major indices trading slightly lower; the Nikkei is -0.7%, Hang Seng -0.9% and Shanghai Composite -0.1%. However, it is highly likely that these overnight developments will soon be forgotten once today’s long-anticipated EU summit kicks off.
While a large amount of expectations management is already underway, we expect a marked increase in quoted rhetoric from EU leaders and politicians as the day wears on. Not only does today bring the commencement of the summit, but we also have a couple of key central bank decisions on tap. First up, the BoE convenes for its last scheduled monetary policy meeting of 2011, where it is expected that both interest rates (currently at 0.50%) and the asset purchase target (GBP275bn) will be left unchanged. The last expansion of the asset purchase programme (totalling an additional 75bn sterling) is still being carried out, and the purchases are not due to be concluded until early in the new year.
Later on, the ECB meeting is expected to yield a cut of 25bp, bringing Eurozone interest rates down to 1.00%. Of even greater interest will be the ensuing press conference, where it is also possible the central bank will extend long-term loans to the fragile banking system. There is growing evidence that the Eurozone is headed back into a recession, highlighted most recently by disappointing PMI surveys, so expect plenty of tough questions to be thrown up to Governor Draghi once we get to the Q&A section of the press conference.
While a large amount of expectations management is already underway, we expect a marked increase in quoted rhetoric from EU leaders and politicians as the day wears on. Not only does today bring the commencement of the summit, but we also have a couple of key central bank decisions on tap. First up, the BoE convenes for its last scheduled monetary policy meeting of 2011, where it is expected that both interest rates (currently at 0.50%) and the asset purchase target (GBP275bn) will be left unchanged. The last expansion of the asset purchase programme (totalling an additional 75bn sterling) is still being carried out, and the purchases are not due to be concluded until early in the new year.
Later on, the ECB meeting is expected to yield a cut of 25bp, bringing Eurozone interest rates down to 1.00%. Of even greater interest will be the ensuing press conference, where it is also possible the central bank will extend long-term loans to the fragile banking system. There is growing evidence that the Eurozone is headed back into a recession, highlighted most recently by disappointing PMI surveys, so expect plenty of tough questions to be thrown up to Governor Draghi once we get to the Q&A section of the press conference.
By
M.Zohaib Gadit
Forex Trading Consultant
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