Market Drivers March 7, 2019
AU data mixed
All eyes on ECB
Nikkei-0.65% Dax -0.49%
Europe and Asia:
AUD Retail Sales 0.1% vs. 0.3%
AUD Trade Balance 4.5B vs. 3.9B
EUR ECB Presser 8:30
USD Weekly Jobless Claims 8:30
Markets were very quiet in Asian and early European trade ahead of the ECB rate decision and presser that promise to be the key driver of trade today.
In Australia the macro data was mixed with Retail Sales missing the mark at 0.1% vs. 0.3% eyed but the Trade Balance coming in markedly better at 4.5B vs. 2.7B forecast. The news was good enough to stabilize the Aussie ahead of the .7000 figure but it’s clear that the decline in housing values in the region is taking its toll on consumption and the consensus view is that RBA may have to ease later in the year if demand does not pick up.
In UK the back and forth on Brexit continued, with most experts convinced that PM May’s vote on March 12th will fail in Parliament once again with some hard-line Brexiteers suggesting that she should simply ask for an extended delay and then do a hard Brexit. That would be a disaster for UK economy and the markets are clearly not pricing that risk, but given the dysfunctional politics of the UK such a scenario can not be ruled out.
In North America today the focus will turn to Mario Draghi and the ECB with markets looking to see if the central bank will continue to stick to it taper stance despite the serious deterioration of economic activity in the region. Ahead of the meeting, there were rumors that ECB may extend it TLTRO loan program – a dovish turn that could actually prove positive for the euro as it would stimulate lending in the EU and thus spur much-needed growth. The ECB is expected to take its growth target and inflation forecasts lower, but the key focus will be on monetary stimulus. If ECB changes posture to a more accommodative the EUR/USD which has held firm at the 1.1300 level could stage a rally. If on the other hand ECB remain unresponsive to the collapse of demand in the region the pair could drop one big figure on market disappointment.