Expect high volatility in USD pairs as markets await the US CPI data

Market focus today
USD Consumer price index (CPI)

Expect high volatility in
Every USD pair
GBPUSD – UK CPI also out
EURUSD – Manufacturing PMI

News Roundup

Unemployment is here to stay in Europe, where it now stands at 11.2 per cent. The ECB projects that one in 10 workers in the Eurozone will be unemployed even after the ECB’s quantitative easing programme has taken effect. This obviously points to some major structural differences between the Eurozne and the U.S. economies. Mario Draghi has hit back at QE critics, rebuffing accusations that the programme will result in governments jettisoning economic reforms, instead insisting “growth is gaining momentum”. Draghi was also very forthright in defending accusations that Greece is being victimised, pointing to the huge ECB exposure to Greece and highlighting that all Greek lending has been within clearly defined and agreed rules.

Also from yesterday, Tsipras and Merkel pledge to work together and have struck a more conciliatory tone, but said that their meeting was not the place for detailed talks about the eurozone’s Greek rescue programme. Meanwhile, Greece is fast running out of cash. Peter Spiegel explains where it can turn when that day comes. However, our view is that the basis for further talks and agreement has at least been laid.

James Bullard, a senior Federal Reserve official and head of the Reserve Bank of St Louis, thinks keeping rates at zero risks inflating asset price bubbles with“devastating consequences”. He said the Fed “should get a move on with normalisation” to avoid having to raise rates aggressively later and create market volatility. His comments add to the growing view that delaying too long will either force the FED to raise aggressively once they do start, or worse, create a bigger, yet unforeseen problem, further down the line.