- Equity markets have held their gains so far despite a risk factor embedded in the ECB meeting
- Euro treads water, the greenback alike while NOK leads the losses
- German bonds trade flat in anticipation of Draghi’s appearance
- Oil trims its early losses following the pledge of Saudi crown prince
Today it’s all about the ECB meeting hence sluggishness seen across the markets should not be unexpected as the European Central Bank is expected to announce a groundbreaking decision on its QE program which could weigh on currencies, bonds and equities as well. Nevertheless, stock market investors have been resilient to risks related to this event so far and the major indices are trading higher (roughly 0.4-0.5%). What’s interesting, the Asian session proved to be quite upbeat despite a slump which had occurred all of a sudden on Wall Street on Wednesday where the two stocks were a culprit.
Looking at the FX front one could notice that the euro is going nowhere against the US dollar which reflects some fears over the ECB meeting. Let us remind that the euro saw a bid during the last ECB meeting in September as Draghi sketched out the buoyant outlook for the economy. This time could be the same as PMIs confirmed the sturdy backdrop making an economic improvement more widespread. Having said that, the primary dilemma for Draghi is inflation which has yet to become self-sustaining. The preview ahead of this event can be found under this link. On top of that, both GBP and NOK are among the weakest currencies in the G10 space with the latter responding to quite a dovish stance presented by the Norges Bank. Riskbank took a similar approach leaving its projected path of interest rate hikes unchanged. In effect, both SEK and NOK have been more volatile but they’ve settled down since then as both verdicts offered little fresh input.
The bond market illustrates some uncertainties as the German 10Y bund yield is trading flat while its US counterpart is losing 1bps. Besides, it’s worth mentioning oil prices which admittedly are trading flat at the time of writing but they’ve trimmed their previous losses following an announcement from Saudi crown prince who has backed extending OPEC output cuts into 2018.
There is no doubt that the recent excellent performance of Bitcoin could have stemmed chiefly from rising demand in anticipation of a fork. In this scenario traders would be credited with free money in form of Bitcoin Gold, however everybody scratches their head what price of the new cryptocurrency could be. Notice that the estimated price could determine a discount seen in the genuine Bitcoin, hence it may set the bar where traders can be willing to buy BTC. Having said that estimation of the price of Bitcoin Gold isn’t an easy task and for that reason prices differ markedly.
Looking forward there are some macroeconomic releases beyond the ECB. Let us come forth with all of them.