- ECB likely to leave rates unchanged while extending QE program
- US jobless claims on track to fall, moving closer to a 43-year low
- Will the mood in the US consumer sector hold on to recent gains?
The European Central Bank’s policy announcement and subsequent press conference are the main events for economic news today. Later, we’ll see new numbers on US jobless claims and the weekly update of Bloomberg’s Consumer Comfort Index.
Eurozone: Interest Rate Decision (1245 GMT) and Press Conference (1330 GMT): Does Italy’s political turmoil that was triggered by Sunday’s referendum vote pose a threat to the expected improvement in Eurozone GDP growth? If so, will European Central Bank President Mario Draghi address the implications for monetary policy in today’s press conference?
Meanwhile, the crowd’s anticipating that the ECB will leave its benchmark refinancing rate unchanged at 0%, according to Econoday.com’s consensus forecast.
Some analysts are also expecting that the central bank will extend its quantitative easing program in a bid to keep the recent improvement in the macro trend intact.
Although the heightened political uncertainty in Italy has strengthened the case for maintaining if not extending monetary stimulus, the hawks are pushing in the opposite direction after last month’s news that the Eurozone annual inflation rate ticked higher. The consumer price index in November increased 0.6% vs. the year-earlier level – the fastest pace in more than two years. Although 0.6% is still well below the ECB’s inflation target of just below 2%, the upward bias in pricing pressure of late has encouraged more calls for tightening.
Meanwhile, the market will be keenly focused on how or if Draghi chooses to discuss Italy’s political uncertainty as a potential economic problem for the euro area if Eurosceptic parties are elected in 2017 in Europe's third-largest economy.
US: Initial Jobless Claims (1330 GMT): Jobs growth picked up in November, posting a gain that’s roughly average for changes posted in 2016. But some analysts are focused on the Federal Reserve’s Labor Market Conditions Index (LMCI) as a sign that trouble is lurking for payrolls in the new year.
The source of concern is LMCI’s persistent year-over-year slide. Although the index has been modestly positive in October and November, changes vs. the year-earlier readings have been negative since February 2015 – a trend that raises questions about the labour market in 2017, according to economists who follow this indicator.
Among the counterpoints is the bullish signal that’s been emanating from the weekly updates for jobless claims. This leading indicator dipped to a 43-year low in mid-November – a drop that's widely interpreted as a bullish sign for the labour market and the economy generally. Even after a relatively large jump in claims in the second half of last month, the number of new filings for unemployment benefits remains close to a multi-decade low.
Today’s update is on track to dispense a fresh round of bullish expectations. Econoday.com’s consensus forecast sees claims falling 13,000 to a seasonally adjusted 255,000 for the week through December 3. That alone doesn’t ensure that all is well. But if you’re inclined toward pessimism regarding the outlook for the labour market and the economy, today’s report on new claims will probably disappoint.
US: Bloomberg Consumer Comfort Index (1445 GMT): Did Donald Trump’s election victory inspire a new wave of optimism among US consumers? If it did, will the upbeat mood survive in the new year?
Only time will tell with regard to the second question, but the answer to the first question appears to be "yes". The University of Michigan Consumer Sentiment Index jumped in November. “The post-election boost in optimism was widespread, with gains recorded among all income and age subgroups and across all regions of the country,” noted the chief economist for surveys at UoM.
The Conference Board’s Consumer Confidence Index also popped last month, but the rise comes with caveats. “While the majority of consumers were surveyed before the presidential election, it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome,” said the group’s director of economic indicators.
Today’s weekly update offers an updated view of the mood on Main Street. Here, too, there’s been a noticeable improvement lately, albeit one that mostly pre-dates the November 8 election. Post election, the Bloomberg Consumer Comfort Index (CCI) has ticked lower after topping out in mid-November. Is that a sign that the post-election bounce is fading?
Keep in mind, however, that the crowd’s looking for the UoM Consumer Sentiment Index to tick higher in the preliminary December reading that’s due this Friday. The projection implies that today’s CCI number is also headed higher. 
Disclosure: Originally published at Saxo Bank TradingFloor.com