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European question of the week “QE or not to QE”


It was rather remarkable week last week in global financial markets. The USD index held its position more or less the same last week, despite unexpected weakness in the US new home sales figures and the disappointing unemployement claims data. At the moment US employment figures standing at its decade highs.

In the UK, the cable did not move much failed to dip below the psychological area of 1.6000 despite disappointing retail sales data, however on Friday the UK QoQ GDP rose 0.7% in Q3 in line with expectations but weaker than Q2’s QoQ +0.9% expansion.

Things got more interesting in Euro side, ECB signalling €1.5 Trillion worth potential QE. The ECB’s Council Member Benoît Cœuré commented that “the Eurozone is in crisis times,” and “the ECB would start buying ABS and covered bonds within the next days.” Looking at things from broader perspective all comments indicate that the ECB is moving towards QE within very short time period. Although investors found it encouraging and the European stocks soared some of the ECB Council’s members aren’t that happy with the recent developments.

Whether or not the ECB’s massive European QE cash wave would be strong enough to push the European economy out of the current turmoil and how bad could the European banking stress test results be are two major questions facing market players at the moment.

The upcoming week is expected to be full of volatility. In Europe the most market driving headlines are expected to the European banking stress test results and market reactions towards it since multiple sources have speculated that over two dozen of the major European banks not to have sufficient capital reserves. In the US Q3 GDP data with the unemployment claims are expected to create the USD volatility in the second half of the week.

Monday, October 27: The market is expected to be opening volatile after EBA’s stress test results announced on Sunday. On Monday the German IFO sentiment indices and the ECB’s September private loan data are scheduled to be released. The private loan data will be the main EURO driving announcement due to the concerns over the banking stress test results.

Tuesday, October 28: With no major macro-economic announcements from Europe, the US will be on the stage. September core durable goods and October CB consumer confidence levels are to be scheduled to be released. Both of these announcements failed to meet expectations previously if the outcome is better than forecasted we may see strong bullish rally in USD. For those of CFD traders, Facebook will also be announcing its quarterly earnings. With its recent highs at $80 could we see breakthrough in FB stock prices?

Wednesday, October 29: Abenomics will open the stage on Wednesday with the Japanese September Industrial production data. Later on the USD will be under the loop with the opening of the two days long monthly FOMC meeting. Given that the Fed is expected to raise the interest rates early 2015 investors will be looking for any hints and announcements on interest rates and other policy measures.

Thursday, October 30: Fundamentally it is going to be busy on Thursday. Starting focus will be on Germany’s Consumer Price Index and the other European indices. From US side, FED Chair Janet Yellen’s FOMC announcement will be the most anticipated development as the FED policy announcements are among the most important global price movers.

Friday, October 31: Japan’s Abenomics once again will be on stage on Friday with September consumer inflation levels and the BoJ will be releasing its monthly policy statement. USD/JPY is expected to have two day rally on Thursday and Friday’s announcements. Later on during the day European CPI, the Chicago PMI and UoM consumer sentiment releases will be the market concluding announcements.

Source: https://www.orbex.com/en/research-team
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