In the overseas markets at the beginning of the week, the US observes Labor Day and will be closed. Major US economic statistics, as well as events and speeches by US financial authorities, are not scheduled. Trading during this time will mainly revolve around the London-European trading hours.
Amidst this, there are several opportunities for European Central Bank (ECB) officials to speak today. Elderson, an ECB Executive Board member, is attending a conference, Weidmann, the President of the German Bundesbank, is participating in a debate on the role of central banks in monetary policy, and Lagarde, the President of the ECB, will give a speech at an event. Additionally, Panetta, an ECB Executive Board member, will be present at a public hearing on the digital euro.
On September 14th, an ECB Governing Council meeting will take place. Market speculation is leaning towards a decision to keep the policy rates unchanged. The sentiment around the European economy has been weighed down by a decline in the manufacturing sector’s sentiment, and there are concerns about the outlook for the non-manufacturing sector as well. Uncertainties regarding energy prices this winter are emerging, making the central bank’s balancing act between inflation control and economic slowdown even more delicate. The ECB has stepped away from giving clear guidance and is holding an approach of data-dependency, treating each meeting as a live event. The interpretations and statements of the above-mentioned ECB officials about economic data could lead to sensitive reactions in the Euro exchange rate.
The Euro might respond sensitively to comments from key figures, and there is a possibility that it could be particularly reactive. Given the recent information that the market has been reacting to, which suggests that there will be no rate hike by the ECB in September based on staff expectations, any remarks that challenge this could lead to a significant surge in buying. In such a scenario, it would be prudent to align with Euro purchases.