Thursday packs a punch

Thursday is the busiest of the week on the macro front as we start the first of a 2-day European Council Meeting. The importance of this is not to be underestimated as it will be attended by Heads of States. They’re expected to discuss rolling out the coronavirus vaccine, testing, and the gradual lifting of restrictions. Climate change and security are also hot topics on the agenda.

UK GDP is out before European markets open. The UK Chancellor painted a poor picture of the UK economy which will suffer its largest output fall in 300 years as GDP is expected to be down over 11% in 2020. The UK has been dramatically affected by the pandemic with lockdown restrictions causing unemployment levels to surge amid businesses being forced to shut their doors. Optimists will be looking for a sign of hope with better-than-expected data, which typically could be viewed as bullish for GBP, whereas a weaker number could be viewed as bearish.

Thursday’s headline event will be the Interest Rate Decision from the European Central Bank, followed by a policy statement and press conference. European economies have been some of the worst affected by the coronavirus, forcing the ECB into finding ways to better support the Eurozone’s economies. The dilemma they face is limited options as interest rates are already at rock bottom, thus Quantitative Easing (QE) has, until now, been their tool of choice.  Last time out, the ECB kept interest rates unchanged but did mention it was ready to increase its stimulus measure as the Eurozone faces a deep and potentially lengthy economic crisis. The press conference at 13:30 GMT is where traders and investors will be focused to see what the plans are going forward to help limit the damage to the economy and attempt to get back on the right track.

The USD could be in focus as we settle into Thursday afternoon when we see the latest Initial and Continuing Jobless Claims, as well as Consumer Price Index inflation data. Employment and inflation are two major points of consideration for the Federal Reserve when deciding on near-term monetary policy. Strong numbers on all fronts could see the USD strengthen as expectations of policy tightening could start to set in.

We finish the week on a quieter note with German CPI data and the Producer Price Index out of the US being the only notable releases.

Market remain volatile as traders look for further clarity on the rollout of a COVID-19 vaccine and any updates, positive or negative, could see exaggerated moves so traders will need to be mindful of risk controls and positions held overnight.

All times indicated are GMT.
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