European markets are trading near the flat line as traders are waiting for the release of the economic data which could make or break the rally, which we have seen so far because the optimism has been at its boiling point amid traders that the ECB is going to trigger the button of the full blown quantitative easing. However, the recent news out of Germany has raised some concerns for me that perhaps the market has once again over estimated Mr Draghi’s commitment and there is a possibility that he may not unleash the market loved QE. Perhaps, if he does not have to persuade Germany, then it could be an easier task, however, if the CPI data for Germany does fall off the cliff and the unemployment number does disappoint the government officials, then the odds could go even higher that we may see some sort of action by the ECB.
It is important for traders keep in mind that we still have not seen the TLTROs coming in effect, which they will next month and perhaps the ECB may want some time to see the impact of these, before they do take the path of further easing. Having said that, traders are going to keep a close eye on the CPI data for the euro zone, which is due tomorrow and despite the fact that the ECB official have said this week in so many words that the market is overestimating the recent statement by Mr Draghi, but I am sure a disappointing number is going to put a bucket of ice cold water on it. Let’s also not underestimate the impact of the Russian sanctions, a headless government in France and Mr Hollande is crying out for more liquidity injection by the ECB. All these factors are not going to make so easy job for Mr Draghi when the judgement day of easing monetary policy will come.
Back in the US, the economic docket does have few firecrackers of its own. We will kick off with the 2nd reading of GDP for Q2 and the forecast is for 3.9%. Following that, we will have unemployment claims data due at 12:30GMT and the forecast is for 299K. Finally the pending homes sakes data will hit the wire at 14:00 GMT and the forecast is for 0.6%.
Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.