European Central Bank and British Election Drive Headlines

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European Central Bank and British Election Drive Headlines

DECEMBER 12, 2019

The U.S. dollar traded in a mixed direction overnight as a slew of economic and geopolitical events are set for today.

Overview

The European Central bank and the Swiss National Bank announced their interest rate decisions and today is election day in Britain which is largely seen as a proxy election for Brexit.

The domestic docket showed that producer prices remain muted.  Overall inflation was unchanged month over month in November, lower than the month prior and economists’ estimates.  A separate report showed that jobless claims jumped last week but analysts were quick to blame holiday volatility for the poor report.  With only the Bloomberg Consumer comfort index due out later this morning, most eyes will likely be on events abroad.  That said, any trade related headlines could spark volatility especially since new Chinese tariffs are set to kick in three days from now.

What to Watch Today…

  • British election results expected late tonight

Complete Economic Calendar can be found here.

EUR

The Euro held steady near recent highs versus the U.S. dollar overnight and is little changed in early trading after the European Central Bank kept rates unchanged.  The move was widely expected, and the central bank reiterated that it would keep rates low and maintain bond buying until it gets near its inflation goal.

The common currency is experiencing heightened volatility at the time of writing as new ECB chief Christine Lagarde starts her inaugural press conference.  Lagarde has not yet said anything out of the ordinary but markets seem jumpy as we get used to a new voice.

GBP

After months of campaigning, election day in Britain has arrived.   Polls have consistently showed that Prime Minister Boris Johnson and the Conservative party have a lead over the Labour party. However, the most recent polls have showed that gap closing.  A clear majority for Johnson would increase the chances that U.K. will leave the Euro at the end of January.  The sterling’s rise over recent months attests to this.  But a hung parliament, which is still a possibility, would add uncertainty back into the mix and cause the sterling to likely tumble.

It is also worth noting that even if the U.K. leaves the EU in January, the story is far from over.  The U.K. would still have to negotiate trading terms with Europe by the end of 2020.

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