ECB on the agenda today
The action in the bond market is something to be wary about as we navigate through the latter stages of the week, though month-end trading is perhaps making things more messy to interpret when trying to get a firm read on the room.
The plunge in long-end yields and flattening of the yield curve is the thing that stands out most and that has weighed on yen pairs over the past few days.
If anything, that also says quite a bit about the economic outlook and confidence (or should I say lack thereof) in the recovery going into next year.
Equities seemed to be taking things in stride initially yesterday but a late selloff saw the S&P 500 and Dow slip lower while the Nasdaq closes near unchanged levels on the day. Amid a drop in yields, tech stocks could come out to party a little so keep that in mind.
Looking ahead today, the ECB is one to watch as the market will try to get a look see on how the central bank feels about the whole inflation situation.
As inflation expectations keep higher and the market pressuring the ECB on the rates front, it'll be interesting to see how policymakers strike a balance in pushing back.
0700 GMT - Spain October preliminary CPI figures
Prior release can be found here. Spanish annual inflation is expected to keep on the higher side on the month as rising price pressures across the region continue to contribute to a surge in consumer inflation going into year-end.
0755 GMT - Germany October unemployment change, rate
Prior release can be found here. German labour market conditions have shown a gradual improvement but time is still needed to get a better and more accurate assessment of overall conditions with the furlough program still running.
0900 GMT - Eurozone October final consumer confidence
0900 GMT - Eurozone October economic, industrial, services confidence
Prior release can be found here. Amid the surge in energy prices as well as supply and capacity constraints, economic sentiment is estimated to have declined this month and may be leaning towards the softer side towards the year-end.
1145 GMT - ECB announces its October monetary policy decision
The September policy decision can be found here. In terms of big decisions, this is probably going to be a placeholder meeting for December. However, the key thing to watch will be the central bank's language/focus on inflation and if they will address that specifically or if they will put emphasis on any plausible action if it turns out not to be 'transitory'. But if anything, I'd expect that to be addressed by Lagarde rather than the statement.
1200 GMT - Germany October preliminary CPI figures
Prior release can be found here. German annual inflation is estimated to jump higher again on the month, reaffirming the ongoing trend. In any case, we'll get a better sense of that via the state readings throughout the day.
1230 GMT - ECB president Lagarde press conference
Language is everything here as the ECB has to strike a balance between not giving ground on the policy front while perhaps needing to acknowledge risks surrounding inflation and the slowdown in the euro area economy going into year-end and next year. The focus will be her words on inflation but I still expect Lagarde to maintain that price pressures are somewhat temporary, though perhaps with a less firm tone than before.
That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
