ECB and NonFarm Payroll – the most important week of the year

The week is one of the most important of the year – by Junaid Wilson.

The main driver in the foreign exchange market is monetary policy, and week we will see if the divergence between the FED and ECB widens.

ECB policy decision: Even though there is great uncertainty about what the ECB will do, on Thursday expectations for additional action seems nearly universal.

On the other hand, it may be significant in that in confirms that the divergence of monetary policy may persist, which in turn begs the question of how much has been been discounted.

 

Previously Draghi had indicated that at this rate, monetary policy had been exhausted.  More recently, Draghi have indicated that a lower deposit rate could still be helpful.  The interest rate market appears to be pricing in about a 0.5-0.7 bp cut in the deposit rate while surveys suggest the market is divided between 0.10 and 0.20 cut a slight majority at the lower end.

This month’s jobs report takes on extra special meaning, This report is seen as the last hurdle to an FOMC decision later on December 16 to deliver the much-anticipated rate hike.

No one expects a repeat of the 271k increase in October non-farm payrolls.  It was the best of the year, the consensus is for around 200k.

Today should be a light trading day, as it’s the last day of the month and we have a busy week ahead of us. We have economic realises from the UK: consumer spending and the EU: CPI

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