The Monday session will be heavily weighted towards Europe obviously, as the United States and Canada celebrate Labor Day. That being the case, we feel that the market will be almost completely dead during North American trading, even in the currency markets which will of course still be open. However, there are a few things that we are watching earlier in the session.
German GDP quarter over quarter is anticipated to come out earlier in the session at -0.2%. With that, this should confirm that Europe could be heading towards deflation, which of course is the European Central Banks biggest fear. This could lead to speculation about quantitative easing, which of course will be a theme throughout the week when it comes to the European Union.
The German Manufacturing PMI numbers come out a little bit later, anticipated to be 52. Again, if that number is less than anticipated, deflation will continue to be a concern, and this could be a bit of a “double whammy” when it comes to ECB expectations. The ironic thing is that you may see a pullback in the DAX, but then a rally. This is because people will begin to speculate that the economy in Germany is struggling, but at the same time it will start to begin to think about quantitative easing coming out of the ECB, which will be positive for stocks, and negative for bonds. It will of course drive down the value of the EUR/USD pair, a market that is absolutely sickly looking at the moment anyway.
Manufacturing PMI comes out of the United Kingdom as well, anticipated to be 55. This is one of those announcements that could give the GBP/USD pair just a little bit of a push to go higher. The candle that we formed during the session on Friday was very promising, and it is perhaps time for this pair to bounce a bit. We believe that there is a solid “floor” in this market down at the 1.55 handle at the moment. This economic announcement could also have a strong effect on the FTSE, so be aware the fact that the better the number, the better the FTSE should do and vice versa.
With the aforementioned holiday today, it’s very unlikely that we see much action beyond what has been previously mentioned.