The economic calendar is taking a breather today but will return with bang tomorrow. Market participants are looking forward to two major central meetings as the Bank of Japan and especially the European Central Bank take centre stage.
After yesterday’s big sell-off, European equities have bounced back and US index futures point to a higher open on Wall Street.
While it may be a quiet day for macroeconomic data, it hasn’t been the case for the markets. Stocks fell sharply at the London open, before paring back their losses sharply, while gold has managed to hold onto its gains after its suspicious-looking drop on Monday.
The euro continues to defy gravity. The single currency is up sharply against all of its major rivals, including the pound which took a beating despite stronger UK inflation figures released this morning.
A classic reaction in the markets to the outcome of the French elections. It was widely expected that pro-euro centrist Emmanuel Macron was going to become the new President of France and that he would beat the euro-sceptic Marine Le Pen by a wide margin. And so it proved.
The euro finds itself higher across the board. The EUR/USD has risen above the 1.0800 handle again, the EUR/GBP to 0.8650 and the EUR/JPY was back at 120.00 at the time of writing.
Inflation has made a dramatic return in the Eurozone. In February, the headline CPI measure rose to 2.0% year-over-year, accelerating from 1.8% in January.
The European Central Bank’s large bond buying programme appears to be finally working its magic. Inflation is on the rise, unemployment is falling and the economic bloc is – believe it or not – growing, all thanks to years of zero interest rates, several versions of bond purchases programme and a resulting weak currency.
It has been a relatively quiet day in the markets due in part to the lack of any major economic news. The US economic calendar in particular will be rather light this week due to Thanksgiving on Thursday.
It hasn’t been a great start for global equities in this last week of September, with European indices dropping between 1.0 to 1.5 per cent during Monday’s morning session, mirroring a similar performance in Chinese and Japanese markets overnight.
