All Eyes On European Markets As The Sterling Slumps
With the European Central Bank meeting on Thursday, the Euro started the week under immense pressure. This effect is due to the expectation that policymakers will deliver new stimuli to boost a regional economy that has experienced shake-ups. Read more about European Markets.
Peer Pressure Raises Optimism
Experts are increasingly optimistic that the ECB will ease its stand on commercial banks because of what other central banks are doing. A good example is the People’s Bank of China, which on Friday moved in to significantly cut the amount that banks can hold as cash reserves.
The effect of this has been the Yuan easing early Monday morning. Market data on Sunday that indicates a decrease in Chinese exports fuels this further. The broader financial markets have, however, witnessed an increased appetite for riskier assets. The New Zealand and Australian Dollar have peaked recently because of this increased appetite.
The dollar, on the other hand, remains unchanged in narrow range against the Yen. This comes as traders expect that the Fed will cut interests rates. Additionally, an inclination towards safe-haven assets was a major contributing factor to this on Monday. Read more about European Market
Export data points towards more easing
Ray Attrill, the head of foreign exchange strategy at the National Australia Bank in Sydney, is of the idea that more easing will happen. According to him, the Chinese export data on Sunday coupled with a failure in breakthrough talks on the Trade War spell doom for Beijing. As a result, tolerance for a weaker Yuan and further easing is the most logical way to go.
He is however optimistic that the market will remain neutral this week. This is after the European Central Bank meeting took place on Thursday. His opinion is stronger, considering the overall market sentiment that supports the Fed cutting down rates.
While this is happening, the Sterling is trading at $1.2276, down 0.10% on Monday. This is as the UK keeps fueling political uncertainty over a no-deal Brexit plan. The uncertainty keeps growing with a 31 October deadline in sight, and the EU expected to maintain a hardstand. The Euro, however, continued its defense after a 0.1% fall on Friday to trade at $1.10295 on Monday.
Despite typhoons in Tokyo on Monday that saw the cancellation of trains, the Yen maintained its position from Friday trading. On Monday, the Yen was trading at 106.91 against the dollar. The AUD traded at $0.6859, a near six week high while the NZD traded at $0.6428. Read more about European Market
An ailing global economy?
With the US and China having recorded low manufacturing activities for the last month, fear is spreading fast. European economies feel this as well, and the Chinese export data on Sunday is triggering more skepticism.
While the markets anticipate favorable policies from the ECB meeting this week, on Monday, experts will have a better perspective. Germany will be releasing its data later on Monday and experts are touting this as a probable indicator of the global economic health. It is good to remember that only a while back, Angela Merkel moved in with her allies to thwart political unrest in Eastern Germany.
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