Structural reforms still need to take place in the Eurozone

Mario Draghi (President of the ECB (European Central Bank)) has stated time and time again that structural reforms need to take place to strengthen the current recovery. It is important to note that structural reforms will take time, the initial stages have been implemented in some countries such as Italy (through Renzi's bill) but still needs to become a law. Thus, Mario Draghi has urged for local governments in the Euro bloc to match the ECB's effort with investment and structural reforms. Over the duration of the recovery, it has been a one-man team (the ECB) trying to bolster the recovery, other parties now need to take some control and do their part. These structural reforms consist of improving the regulatory environment for firms and reducing red tape. This would allow new businesses to thrive and existing businesses have to spend less to jump through hurdles. As well as structural reforms, monetary policy has been adjusted by cutting the refinancing rate and deposit rate from 0.15% to 0.05% and -0.1% to -0.2% respectively. In addition, the ECB will be buying ABS (asset-based securities) and covered bonds to help the current stagnant recovery. The ECB are ready to take more measures if need be, to reduce the threat of deflationary pressures. It is also important to note that Mario Draghi has stated that they've reached the lower bound for interest rates, suggesting that an interest rate cut is unlikely in the future. 

The US is releasing a wealth of economic data, this should give us an insight of how well the recovery is going. This data includes PPI m/m (Forecast: 0.1%, Previous: 0.1%, 16/09/2014), core CPI m/m (Forecast: 0.2%, Previous: 0.1%, 17/09/2014), building permits (Forecast: 1.04M, Previous: 1.06M, 18/09/2014), unemployment claims (Forecast: 312K, Previous: 315K, 18/09/2014) and Philly Fed Manufacturing Index (Forecast: 22.8, Previous: 28.0, 18/09/2014). We expect that the majority of listed data (above - excluding unemployment claims) to be on forecast/above forecast due to the current strength of the recovery. In addition, with the current pace of the recovery, investors are expecting an early interest rate hike. We shall find out from the FOMC statement, FOMC press conference and Janet Yellen's (Chairwoman of the Federal Reserve) speech to have a hawkish tone on interest rates due to the current recovery. These three events will help provide us with an insight on the timeframe for an interest rate hike next year. However, this does not imply an early interest rate hike as there is still further slack in the labour market that needs to be cut.