ECB stimulus hopes Last Friday ended with a decent bounce in risk assets which helped to settle investors’ nerves ahead of the weekend. The rally in equities was triggered by speculation that the world’s major central banks may be preparing the way for further monetary stimulus. James Bullard of the US Federal Reserve suggested that the Fed may consider holding off from winding down its bond purchase programme at the end of this month. However, other Fed members felt that the US economy remains robust enough to deal with what amounts to modest monetary tightening. Nevertheless, there was a cautious start to yesterday’s trade after China released better-than-expected GDP and Industrial Production numbers. The market interpretation was that the stronger numbers meant that Chinese policymakers were less likely to add to their existing stimulus package. As a result, the US dollar was significantly lower in the early trade yesterday. The EURUSD traded up to 1.2840 while the Japanese yen was also firmer as investors trimmed back their risk exposure. However this trend didn’t last long. The euro fell sharply mid-morning following a Reuter’s report that the European Central Bank (ECB) was considering implementing a programme of corporate bond purchases as early as December. This would be in addition to its covered bond programme which began this week. The story was soon disputed by the Financial Times. But that didn’t stop the major US stock indices registering their best day of gains so far this year. The most significant data release due out today is US CPI. We also have Canadian Retail Sales and the Bank of England’s MPC vote results on the Bank Rate and Asset Purchase Facility.
Posted on: Wed, 22 Oct 2014 08:26:39 +0000
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