Recently, the dollar market has been nervously fluctuating without a clear direction. It remains to be seen whether these two events will trigger a trend in the market.
Regarding the ECB Governing Council, the consensus in the market is for the main policy interest rates to remain unchanged. The ECB has maintained an “data-dependent” approach to policy decisions and has not provided clear guidance on future directions. The focus has been on the timing of a potential interest rate cut due to the trend of inflation slowing down. While there was speculation of an early rate cut in March in the short-term money market, expectations have shifted towards April. Some ECB officials, especially hawkish members, have expressed concerns that it may be too early to discuss a rate cut. However, ECB President Lagarde has recently hinted at a rate cut starting in the summer, possibly as early as June. The short-term money market and ECB officials’ outlooks are gradually aligning. Lagarde’s comments during the ECB press conference will be closely watched.
As for the US GDP preliminary report, market expectations are for a growth rate of around 2.0% on a quarter-on-quarter annualized basis, a slowdown from the previous 4.9%. However, the US economy continues to grow, and concerns about a recession have diminished. While there is some expectation of an early rate cut in March in the market, it may be premature given the strong economic conditions in the US compared to Europe. The timing of the rate cut will be of interest, taking into account factors such as personal consumption and deflators.
In addition to these key events, there are various economic indicators scheduled to be released in international markets today, including the German Ifo Business Climate Index (January), South African Producer Price Index (December), central bank policy rates in South Africa and Turkey, US Wholesale Inventories (preliminary, December), US Initial Jobless Claims (January 14 – January 20), US Durable Goods Orders (preliminary, December), and US New Home Sales (December).
In terms of speeches and events, besides Lagarde’s ECB press conference, there will be a press conference by US Treasury Secretary Yellen discussing the US economy, including topics related to President Biden’s “investment in the US” and “modern supply-side economics.” There will also be a US 7-year bond auction ($41 billion). Earnings reports from US companies like T-Mobile, Comcast, Intel, Visa, and others will be closely watched.
Today’s schedule is packed with events, especially at 22:15 with the ECB policy interest rate announcement, 22:45 with Lagarde’s press conference, and 22:30 with the release of the US GDP data. If there are significant movements in the EUR, we will consider riding the trend.
