Markets Eye Thursday’s Central Banks Decisions

5 September, 2012

Tom Arnold

There wasn’t any particular data that caused this, but the main mover was the Dollar with the other currencies correcting their mutual positions based on their performance versus the Greenback. The Dollar’s strength is somewhat of a surprise as it followed some bad US manufacturing figures, but was helped along by some data out in Australia and China – the US Dollar is such a global currency that the movement of seemingly unrelated markets can often cause unexpected volatility, e.g. Chinese manufacturing data is released, most products made in China are priced in Dollars, therefore increased/decreased demand affects the Dollar’s strength.

Today is a relatively quiet day on the markets, with only a couple of releases of any great import – European PMI and retail sales figures. Both are expected to be weaker than previous, so the markets are probably prepared for a bit of Euro weakness. If this doesn’t turn out to be the case then expect a drop off from these 2 week highs.

This week all eyes are on the Bank of England and European Central Bank monthly policy announcements, tomorrow lunchtime. There aren’t any particular expectations of surprise moves, with interest rates expected to remain the same and calls for more QE not necessarily loud enough for this month. However the markets will keep a very close watch on the ECB’s press statement to see what measures might be used to help combat the ongoing crisis in Europe. Friday then sees the US non-farm payroll figure for the month – probably the biggest piece of US data that comes out each month.

So expect some quite serious volatility in the next 48 hours as these heavy weight data releases hit the markets. If you aren’t of a gambling inclination then avoiding these data releases with a forward contract could well be the answer for you – make sure you get in touch with your CI account manager to keep abreast of all your options.