A big week for the euro and despite Brexit

by | October 23rd, 2017, 12:50:46 | News

ECB Headquarters

Eyes down and off Brexit for the time-being, the Euro has a defining week ahead

The all-important October German, French and Euro-area Manufacturing/Services PMI`s are scheduled for release tomorrow 24th October, with expectations generally, for slightly lower prints than for September`s readings. ECB` Q3 Bank lending survey also due with actuals released Thursday. If that is significant enough, then the real definer is the ECB`s Interest rate and much expected monetary policy decision which is due to be announced on 26th October.  German IFO Business Climate gets in the way Wednesday 25th with expectations flat to September`s print with UK GDP print and US Core Durables, New Homes and Canada`s Interest Rate decision with no change expected to the current 1% after 2 consecutive hikes recently.

All challenging the Euro`s current range.

Interest rates are almost certain (in market`s expectations) to be unchanged but the real event is the ECB`s decision(s) on mon pol. Some ECB policy-makers see the limit on the current bond purchases at approximately €2.5 trillion by year-end. Discussions and decisions will surround the pace and time-constraints to purchases of the €150-300 billion of bonds that are available before completing the current programme.

The ECB are faced with a choice of either a small reduction in bond purchases or a larger reduction and allowing purchases to extend over a longer period. The more dovish option that would (in markets eyes) push back the timing of a first hike in cash rates.

 With European stocks doing relatively well and today, German Bunds (prices) surging ahead of the releases, Greece`s Budget deficit surplus has been revised down today to 0.5% of GDP from the 2016 number 0.7% with debt UP to 180.8% (Eurostat) and Italy`s deficit revised UP today to 2.5% of GDP in 2016 off a previous 2.4% and debt revised down to 132% (Eurostat)…..the tone is set.

First up: a taster with Euro-area Consumer confidence 2pm GMT today. -1.1 is expected from last month’s -1.2.

Si Heath
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