Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:
Main Trading Event Of The Day: EUR CPI Flash Estimate @ 09.00 GMT
WHAT WE’RE WATCHING TODAY
Dollar Rises As This Week Could Be Crunch-Time For The ECB
The dollar rose against the euro on Monday as disappointing German inflation data along with the expectation of very weak May inflation figures in the Eurozone, were the latest signs that the European Central Bank could be forced to ease monetary policy this week to fight low inflation. German inflation for May missed expectations, with the EU-harmonized annual reading falling to 0.6% from 1.1% in April. Separately, data showed the region’s manufacturing growth slowed by more in May than initially estimated. Market participants believe that the ECB cannot afford to do nothing this week, having intentionally raised hopes of further monetary easing so the expectation is that the ECB will go ahead and cut rates. The maximum impact from an ECB rate cut would come with a negative deposit rate and liquidity-boosting measures. The goals would be to cap EUR appreciation while reducing fragmentation and strengthening forward guidance. The euro EUR/USD fell to $1.3598 from $1.3635 on Friday. The euro has fallen since ECB President Mario Draghi hinted that easing could come in June. The ECB will issue a decision on Thursday, followed by a press conference by ECB President Mario Draghi. At the same time, the Federal Reserve is on track to finish its stimulative bond-buying program by year end, setting up for eventual rate hikes.
More Monetary Easing Could Be On The Way As Australian Economy Slows
Australia’s economy appears to be slowing and some economists argue that a more subdued outlook could lead to further monetary easing from the country’s central bank. Australia is due to report first quarter economic growth on Wednesday. While economists expect robust growth of 3.2 percent on-year, up from 2.8 percent in the previous quarter analysts expect the economy will take a turn for the worse in the second quarter with growth expected to slow to 0.4 percent on-quarter from 0.7-0.8 percent in the first quarter. This pull back may prompt the Reserve Bank of Australia to take a more dovish stance. Australia’s economy enjoyed 20 years of strong growth thanks to its mining boom, but lost some of its luster recently as the boom showed signs of peaking and growth in China, its largest trading partner, slowed. Furthermore, Australia’s conservative government delivered the country’s harshest budget in 20 years last month and many economists are concerned about the toll it will take on the economy. Business and investor confidence dropped following the budget, while red-hot housing prices eased, a factor that economists worry could dampen consumer spending. Financial conditions have tightened and consumer sentiment is at levels not seen since prior to the current rate easing cycle. The RBA left interest rates at a record low of 2.5 percent on Tuesday, for the ninth straight month.
Dow & S&P End At Record Highs
The Dow and the S&P 500 finished at record highs again yesterday after a reading on U.S. manufacturing was revised to show more strength than initially indicated. Industrials and material stocks were among the day’s biggest gainers, while the technology sector ended lower, weighed down by big names like Apple and Google. The Institute for Supply Management officially corrected its earlier report to show that the pace of growth in the U.S. manufacturing sector accelerated in May. Wall Street fell initially after the first report, with all 10 S&P 500 sector indexes down for the day at one point. The Dow Jones industrial average rose 26.46 points to 16,743.63 as the S&P 500 gained 1.40 points to 1,924.97. The Nasdaq Composite, however, dropped 5.42 points to 4,237.20. The Dow ended at a second consecutive record high while the S&P 500 closed at a third consecutive record though volume was still slight, suggesting a lack of conviction behind the advance.
That sums up today’s highlights! Don’t miss our regular updates on today’s tradable events via our Facebook, Twitter, Google+ and LinkedIn pages. We hope you have a profitable day on the markets.
