Forex - EUR/USD off 1-month highs as markets digest ECB, Draghi
Michelle Meyer, deputy head of US economics at Bank of America Merrill Lynch said while there's a lot that could move the markets through the end of this week, US Fed chair Janet Yellen will remain focused on what's going on in Europe.
All eyes are on Europe as the Eurozone Finance Minsters meet in Brussels to discuss Greece‘s dwindling finances. Nick Parsons, head of research of UK & Europe at National Australia Bank, said there is not much expectation about the deal, which is also being reflected in the currency market.
Forex - EUR/USD hits fresh 4-1/2 year trough on data, Draghi
Sean Darby of Jefferies believes that since Draghi‘s comments in November, there has been a greater probability placed on an announcement of sovereign bond QE at the forthcoming ECB meeting. Jefferies European economists expect that Draghi will hold off on such a step this month.
Fears of a setback were heightened on Monday following some surprise news from Japan: the world's third-largest economy fell into recession after gross domestic product (GDP) shrank in the third quarter.
Wall Street looked set to turn lower at Thursday's market open, as caution over the European Central Bank's forthcoming announcement overshadowed record gains on Wednesday.
The European Central Bank (ECB) on Thursday cut interest rates to a fresh record low. The central bank has cut benchmark interest rate to 0.05 percent from 0.15 percent and marginal lending rate to 0.3 percent, while deposit rates have been slashed to -0.2 percent from -0.1 percent.
The Fed's policy interest rate – the federal funds rate (the only interest rate it directly controls) – traded at 0.08 percent last Friday, significantly below its 0.25 percent target and was roughly identical to the 0.10 percent observed a year earlier.
WTI oil prices inch modestly higher after jobless claims, Draghi
The 23-man Governing Council had faced intense market scrutiny in the run-up to Thursday's decision after a shock slump in euro zone inflation to 0.7 percent in October - far below the ECB target of just under 2 percent.
Investors have been anticipating Friday`s U.S. October employment report; even though it will be skewed by the partial U.S. government shutdown in October, it could signal how close the Federal Reserve is to tapering its quantitative easing program.
Ahead of the ECB meet today, Guillaume Menuet of Citi said that the bank will keep its rates unchaged. The central bank will consider the rebound in headline inflation and improvementin overall sentiment, but is unlikely to sound 'significantly dovish', added Menuet.
Draghi said the bank's independence was not compromised because it did not automatically have to start bond purchases just because a government had applied for a bailout. The ECB "retains its full discretion," he said.
\The euro remained near a two month high and European shares eased on Thursday, as investors waited to see if the European Central Bank will cut rates and hint at more measures to boost struggling eurozone economies.
ECB policymakers rebuffed suggestions that Europe should ease up on austerity and said that while the central bank has room to cut interest rates, such a move would not necessarily help the economy much.
European Central Bank President Mario Draghi called on euro zone governments to implement structural reforms on Thursday, warning that the economy should stabilize later in 2013 but that downside risks to growth remained.
Gold fell further on Friday as the euro weakened on renewed concerns over the health of the euro zone economy, while investors eyed China trade data for more trading cues.
The European Central Bank will monitor the impact of a strengthening euro on the currency bloc's economy but said it was not a policy target and showed growing confidence in the region.
Mecklai graph of the day: Italian Ten-year yield in 2012 - The euro-region leaders have been trying to find avenues for bringing down the borrowing cost of the ailing euro economies to avoid a Greece like default.
Michael Michaelides of RBS explains to CNBC-TV18 that the increased likelihood of Spain asking for ECB aid, Greece being allowed the next tranche of aid and the US polls will occur simultaneously by the first week of November.
Christopher Palmer, Henderson Global Investors, says that today, investors will be looking for a green light from the politicians for the bond purchase program. Skeptics will look for more indications that structural reforms in Europe are also on the agenda or have been agreed to behind the scenes.
Marco Valli, chief Euro Zone Economist, UniCredit, says that the market will not pay much attention to what happens on the VIX front because having a rate at 0.75 or 0.5, when the monetary policy transmission mechanism does not work properly, that does not make any difference for the economy or there is only very marginal difference.
Stephane Deo, chief european economist, UBS, says that for the market there are lot of risk in near future like ruling of German Constitutional Court and other factors. He thinks people are worried and they have short the European equity and European fixed income.
Sarah Hewin, chief economist –Europe, Standard Chartered, explains to CNBC-TV18 that ECB chief Draghi is attempting to build consensus before the central bank‘s meeting on September 6. Hewin adds that even if the expected rate-cut of 25 bps is not announced, Draghi will reveal other policy measures.