INVESTORS AWAIT ECB POLICY DECISION
Thursday is another active day in the global financial markets, with monetary policy set to dominate the headlines.
The European Central Bank (ECB) will deliver a highly anticipated policy decision at 11:45 GMT. Although no changes are expected, ECB President Mario Draghi may signal the way forward with respect to quantitative easing. ECB officials are under growing pressure to begin removing policy accommodation following a stellar first half.
However, most analysts seem to agree that Draghi will leave off the QE discussion until next month. But that won’t stop policymakers from deliberating the way forward in the wake of above-average growth and a surging euro.
In terms of economic data, the European Commission will release its second estimate of Eurozone Q2 GDP at 09:00 GMT. The revised estimate is expected to show quarterly growth of 0.6%, unchanged from the initial estimate. This translates into a year-over-year gain of 2.2%.
In North America, the Department of Labor will release its weekly jobless claims report for the period ended September 1. Applications for first-time unemployment benefits are forecast to rise by 5,000 to a seasonally adjusted 241,000. Jobless claims have held below 300,000 for more than two years.
North of the border, Canada will report on building permits at 14:00 GMT.
Earlier in the day, the Australian government said retail sales were virtually unchanged in July, confounding expectations for a 0.3% increase. Australia’s trade surplus also narrowed to $460 million in July form $856 million, separate data showed.
The euro is trading sideways ahead of the ECB rate announcement. The EUR/USD has traded within a narrow range and is roughly 100 pips below last week’s multiyear high. The fundamentals will drive the pair in the coming hours, with all eyes on Mario Draghi.
The Australian dollar saw narrow movement after Thursday’s data releases. The AUD/USD was trading roughly 10 pips below 0.8000 during the Asian session. The pair continues to be rangebound, and faces strong support near the 4 September low of 0.7942. On the opposite side of the ledger, the Aussie faces resistance at 0.8028. A clean break above this level could lead to a challenge of the yearly high near 0.8065.
The loonie’s incredible run reached a new milestone on Wednesday after the Bank of Canada raised interest rates for the second time this year. The USD/CAD exchange rate plunged nearly 200 pips to 1.2232, where it is currently trading at multiyear lows. The sharp decline makes the technical indicators less relevant for the time being, as the market looks to absorb the fundamentally-driven move. For the time being, the USD/CAD is struggling near two-year lows. The pair is capping off its fourth straight bearish month, according to technical analysts.