MARKETS STEADY AS CENTRAL BANKERS TAKE CENTRE STAGE
All is calm in the financial markets Tuesday morning, as investors turned their attention to three central bank speakers who could provide important clues about monetary policy.
At 08:00 GMT, European Central Bank (ECB) President Mario Draghi will make introductory remarks at the ECB Forum on Central Banking in Portugal. Although Draghi’s text will not be made available, his opening remarks will be broadcast live through the central bank’s main website.
Earlier this month, Draghi reassured traders that monetary policy will remain highly accommodative for the foreseeable future as the euro area recovery gathers pace. However, several market participants believe the ECB will unwind record stimulus sooner than previously expected on account of faster growth and inflation in the 19-member Eurozone.
At 10:00 GMT, Bank of England (BOE) Governor Mark Carney will also deliver remarks that will be closely watched by the financial markets. Carney’s grip on decision-making came under attack earlier this month after fellow policymaker Andy Haldane said he is considering voting to raise interest rates this year. That goes against the grain of Carney’s pledge to keep rates at record lows.
The BOE slashed interest rates again last summer in response to the Brexit vote. Brexit talks formally began last week.
In other news, the BOE will release the Financial Stability Report at 09:30 GMT. The report provides a snapshot of Britain’s financial sector from a stability and resilience point of view.
In other policy news, US Federal Reserve Chairwoman Janet Yellen is also scheduled to speak on Tuesday mere weeks after the central bank voted to raise interest rates for the second time this year. In doing so, the Fed forecast at least one more rate hike in 2017.
Traders are also keeping a close eye on precious metals after gold prices declined sharply at the start of the week.
After an unconvincing rally, the euro finds itself in familiar territory against the US dollar. The EUR/USD exchange rate hovered in the low-1.1180 region at the start of the trading session amid generally higher dollar demand. The sellers appear to be in control over the short term, which will place further pressure on the pair.
Cable ran into pressure on Monday, failing to sustain a rally north of 1.2750. This suggests that risk-off sentiment remains in focus as traders continue to focus on Brexit negotiations. The dollar index also bounced back in early week trading despite underlying weakness of US economic data. The GBP/USD appears to be rangebound for the time being.
Bullion fell to nearly one-week lows on Monday, a move that sent prices below the key 23.6% Fibonacci retracement. Gold’s near-term outlook is wrought with challenges as precious metals fail to break out of an established range.