ECB Policy Meeting Minutes to Drive the EUR, with the Dollar on the Bounce

Daily Update - 11th January 2018

Yesterday’s Focus

•              GBP The Industrial Production, Manufacturing production, NIESR GDP Estimate

Yesterday’s Market

On Wednesday, French Industrial Production came in with a minus -0.5 result, which was slightly worse than expected. The Euro, along with the Pound, has remained under pressure, but this has more to do with profit taking after the gains both currencies made against the U.S Dollar over the holiday season. The European Central Bank will issue their Monetary Policy Meeting Accounts report tomorrow. And Industrial Production data will be brought forth for the entire European Union.

 

Today’s Focus

•              EUR ECB Monetary Policy Meeting, Industrial Production

•              GBP BOE Credit conditions survey

•              USD Initial jobless claims, William Dudley Speech

Today’s Market

For the EUR, the markets will be looking ahead to the ECB monetary policy meeting minutes that are scheduled for release this afternoon. With the tapering to the asset purchasing program is now in progress, the markets will be looking for any talk of a shift in policy towards interest and deposit rates, with news of a possible end to the asset purchasing program post September of this year also a factor to consider.Any chatter on interest and deposit rates could see the EUR bounce back to high $1.20 levels later today. At the time of writing, the EUR was down 0.04% to $1.1943, with the Eurozone’s industrial production figures due out later this morning forecasted to provide some support to the EUR ahead of the minutes release.

Following Thursday’s stats out of the UK that left the Pound struggling for direction, there are no material stats out of the UK this morning, with a bounce back in the Dollar ahead of the European open weighing on Sterling, with Brexit back in focus.Market sentiment towards the Dollar has been mixed, with news of China’s plans to pull back on purchasing U.S Treasuries overshadowing some hawkish FOMC member commentary from earlier in the week. Concerns were quashed however, with the Chinese government denying that it was looking to pull back on purchases, providing the Dollar with much needed support this morning.On the data front, stats out of the U.S are limited to the weekly jobless claims figures, together with wholesale price inflation numbers that are not forecasted to be particularly bullish for the Dollar ahead of tomorrow’s retail sales and consumer price numbers.While the stats may be on the negative side for the Dollar, FOMC voting member Dudley is also scheduled to speak later in the day, with any hawkish commentary likely to offset any data driven softness in the Dollar.

For now, the markets remain relatively dovish on the outlook for U.S rate hikes through the year, but if Dudley joins Mester and Williams in support of at least 3 hikes this year, the pendulum may begin to swing in favour of the hawks.