European markets are trading higher once again this morning as the positive sentiment from the Asian markets is forcing the sentiment higher. However, it is imperative to remember that the backbone of this is based on the fact that the traders are expecting no U.S. rate hike during this month. The probabilities for the U.S. rate hike for this month are as low as 8% and for the month of December, the rate hike is very much in question. Most investors are not expecting any rate hike this year given how feeble the economic data is. The ISM non manufacturing data released yesterday for the U.S. has further dampened the rate hike expectations. Although, this data has been tremendously robust during this summer and a small feebleness is a typical thing.
In Asia, equity markets are maintaining their gains for the second day during this week as China remain closed for their long holiday. Another component which is making the traders to hold equities is also based on the news that the U.S., Japan and 10 other Pacific Rim countries have established a five year long contract to develop a Pacific Partnership.
The Euro is under pressure this morning after the German factory orders m/m printed another shocking number. The forecast was for a gain of 0.5%, but the reading fell by -1.8%. Not a positive number at all and more headache for the president of the ECB- Mr Draghi. The Euro started losing its steam yesterday when the ISM services ISM data created more concerns about the recovery and the on going stimulus package in the Eurozone. Although, France out paced others, but given that the economic engine of the Eurozone is not performing well, the rest of the countries will struggle to stay upbeat. Mr Draghi is scheduled to speak later this evening and we are expecting that he will assure the markets that the bank is ready to take more actions if the economic data remain puny and lurks the recovery element further.
On the flip side- the dollar side, the focus will remain towards the Federal reserve committee member’s speeches. There are total six speeches scheduled this week, but only three of them are the voting members and all three voting members are known doves. This could make the dollar a little weaker.
As for the British Pound, the services PMI released yesterday took a lot of wind out and this has pushed back the rate hike expectations further and the MPC members’ decision on Thursday to remain very much in focus. We also have the Halifax HPI m/m data due this morning and it is expected to print the reading of 0.1% while the previous reading was at 2.7%.
In other economic news, the U.S. trade balance will be released at 13:30 BST and the forecast is for -47.6B.