What are the main events for today?
EUROPEAN SESSION
In the European session, we don’t have much on the agenda other than the French trade balance. The data won’t change anything for the ECB, so the market reaction will be muted.
The focus remains on French bonds after the recent surge in the OAT-Bund spread to the highest level since the European debt crisis. We’ve seen some narrowing this week. Some of the improvement might have been triggered by position squaring given the overstretched levels, but the French government has also unveiled plans to sharply narrow the budget deficit by restraining spending and raising tax revenues. Moreover, the presidential frontrunner, Merine Le Pen, has vowed drastic budget cuts.
The worst might be behind, but traders will continue to keep an eye on the developments. The latest move higher in French yields wasn’t caused by French drama but by a jump in oil prices that almost erased all the losses since Monday.
AMERICAN SESSION
In the American session, we only have the FOMC meeting minutes on the agenda. This is almost never a market-moving report because it’s old news by the time it gets released. In fact, the minutes are released three weeks after the FOMC rate decision, and by that time the market already knows the Fed’s stance. Moreover, in those three weeks, there could be a change in the macro or geopolitical picture that make the minutes stale.
In this particular case, we’ve got Fed’s Williams and Fed’s Jefferson pushing back against a rate hike in October. There is now just a 21% probability of a hike and we will likely need a hot CPI report to increase the chances to 50% or more. The focus will remain mostly on the Middle East as oil prices continue to consolidate, awaiting new developments.
CENTRAL BANK SPEAKERS
- 15:00 GMT/11:00 ET – ECB’s Schnabel (hawkish – voter)
- 17:30 GMT/13:30 ET – ECB’s Vujcic (neutral – voter)
This article was written by Giuseppe Dellamotta at investinglive.com.
