SLOW MONDAY SESSION LIKELY TO KEEP INVESTORS FOCUSED ON POLITICS
A dearth of economic data on Monday will keep investors glued to US political developments as Republicans race against time to implement a new tax bill before the year’s end.
The day begins at 07:00 GMT with a report on German producer inflation. The producer price index (PPI) is forecast to rise 0.2% in October after climbing 0.3% the month before. This translates into a year-over-year gain of 2.7%. Annualized PPI came in at 3.1% in September.
Later in the session, the Greek government will report on the current account balance for the month of September. The August balance showed a surplus of €1.827 billion when measured in year-over-year terms.
At 14:00 GMT, European Central Bank (ECB) President Mario Draghi will deliver a speech that will be closely watched by the financial markets. The ECB is embarking on a long path to policy normalization after announcing it will begin to wind down its quantitative easing program next year. However, policymakers said there is a good chance that stimulus will continue longer than previously expected.
It is unlikely that Trump’s Republicans will pass much needed tax reform this year. Several members of his own party have lashed out against the proposed reforms, signaling that they will not support any measure that increases the deficit. Trump’s tax plan intends to make up for the shortfall with added growth.
US markets are expected to see diminished volume as the week draws to a close as traders take a few extra days off for the Thanksgiving holiday. This could impact US dollar pairs on Thursday and Friday.
The euro slammed on the breaks Monday, falling sharply below the 1.1800 handle. The EUR/USD touched a session low near 1.1720. It would later recover near 1.1732 for a daily drop of 0.5%. The pair has fallen below the immediate support level of 1.1745. The psychological 1.1700 level is the next zone of support, followed by 1.1665. On the opposite side of the ledger, immediate resistance is located at 1.1830, followed by 1.1860 and 1.1890.
The dollar traded within a narrow range against the yen on Monday, as the pair continued to hold near 112.00. Prices remain well supported above 111.90. A clean break below that level would expose heavier losses toward 111.50, which is a critical support level.
Cable traded within a narrow range at the start of the week, with the GBP/USD holding slightly above 1.3200. The pair faces immediate resistance at 1.32330, followed by 1.3260. Pound sterling remains at the mercy of Brexit talks, which means investors can expect further volatility in the near term. Economic data from both sides of the Atlantic can also influence this trade.