This week was somewhat of a quieter affair in terms of newsflow given the Thanksgiving holiday and as markets brace themselves for the slew of tier 1 releases next week. In terms of price action this week though, EUR once again saw a significant bout of weakness on Wednesday following the latest source reports that suggested officials are evaluating staggering charges on banks hoarding cash with other options including purchasing further debt. This was enough to send EUR/USD back below 1.0600 to print its lowest level since April, however losses were capped by large touted bids at 1.0577 and 1.0574.
Thereafter, price action subsided somewhat heading into the Thanksgiving holiday and subsequent lack of newsflow. However, Friday saw a significant depreciation in CHF with EUR/CHF breaking above 1.0900 and USD/CHF printing its highest reading since 2010. This subsequently prompted speculation over possible SNB intervention in a pre-emptive move ahead of potential easing next week from Draghi et al at the ECB. Following this move, USD saw broad-based gains with the USD-index once again breaking above 100.00, out-muscling its major counterparts and sending gold to its lowest level since February 2010.
In terms of what lies ahead, markets will be served a deluge of data and tier 1 releases. Starting in Europe, next week will see the ECB come to market with their latest policy announcement. Ahead of the event, consensus is calling for a 10bps cut to the deposit rate, however, numerous invest banks and recent source comments from the ECB have suggested that the ECB could actually come to market with a more aggressive cut in the region of 15-20bps. Furthermore, analysts have also suggested that the ECB could expand the pool of securities in their QE programme to include regional bonds, increases the size of their monthly purchases and extend the duration of the programme.
Stateside, next week sees the release of US nonfarm payrolls with consensus currently calling for another stellar month of gains (200k), with such a reading likely to reassure markets that the Fed will be set to lift rates later in the month. That said, with markets currently pricing in a 74.0% chance of Dec lift-off, it would take a particularly disastrous reading for participants to perhaps revaluate their expectations for the 16th December.
Another event to be aware of is the latest OPEC meeting on Friday with consensus suggesting that OPEC will leave their production target unchanged at 30mln bpd. So far, OPEC have resisted the temptation to lower output, with rhetoric suggesting they’ll be defiant and the cartel will not lower their output unless other oil producers also cut their output. This is a particularly important event given the role that energy prices play in forming inflation expectations and thus central bank policy, with current levels of inflation continuing to provide headaches for many a central bank around the world.
Finally, next week will also see the release of the latest round of Eurozone manufacturing and services PMI data with rate decisions also expected from the BoC and RBA – both of which are expected to refrain from cutting rates further.