With three National Holidays today which began in Japan as they celebrated Health Sports Day, which sounds a great way to get people involved in sports and physical activity, before moving to Thanksgiving in Canada and Columbus Day in the US, markets are likely to be relatively quiet and in a more reflective mood. This is probably only to be expected given the volatile whipsaw price action that accompanied equity markets last week.
News releases started overnight with China posting better than expected Trade Balance figures which showed a rise in exports. This appears to have halted the slide in the Aussie, particularly against the JPY, the USD and the EUR. And with further Chinese data between now and Wednesday, in particular the CPI and PPI numbers together with the NAB Business Confidence release for Australia early Tuesday, the Aussie is definitely one to watch. Moving to Europe, the news releases begin on Tuesday with CPI for the UK and the all important German ZEW Economic Sentiment release, the forecast for which has been given at 0.2, against a previous of 6.9. To put this number into context, in January this year this index came in at 63.4 but it has been in free fall ever since, and confirming (if confirmation were needed) of the dire state of the German and eurozone economies.
Tuesday also sees a regular meeting of European finance ministers who in the past have been known to give press briefings which have resulted in volatility for the euro. However, quite what they are likely contribute in any meaningful way is debatable. Of greater significance will be any comments from ECB President Draghi who is due to speak in Frankfurt. Given the above fundamental picture the outlook for the remains bearish, but with a less heavy tone and what we may witness in the short term is a repeat of the re-test of support in the 1.2540 region which was tested last week. Whilst the fundamental news for the euro continues to be bleak much of this has already been factored into the current price action, and only shock news from Draghi (ie a decision on anything) is likely to surprise the market.
By Anna Coulling