Week in FX Europe – Forget ECB Next Week-Funding Could Be More Expensive

Next week is a shortened trading week for North America. From a data perspective investors will have a lot to digest before ending their sprint at next Friday’s non-farm payroll report. Before investors get to endure any vulnerability’s from the employment announcement, the global investors will have to endure both the copy and rhetoric from a plethora of Central Bankers, and the European Central Bank is one of them.

The ECB’s 23 Governing Council members will meet against a backdrop of improving Euro-zone economic data to discuss their monetary policy. Their own regions gradual recovery remains very much uneven, and continues to be led by Germany. The common theme is that “for the foreseeable future, euro interest rate hikes are excluded.” They are likely to remain at “present or lower levels for an extended period of time.”

Political tension in the Middle East is likely to have more of an impact rather than an ECB announcement and it will probably be felt more by the different euro-zone government issues next week. Austria, Germany, Spain and France will offer a total €18.5b worth of government bonds, and all of these auctions are scheduled ahead of the ECB’s rate setting announcement next Thursday.

Europe not only has to contend with the possibility of the Fed beginning to taper their $85b monthly bond-buying program, but now they have to price in geopolitical risk as well. In times of political and economic uncertainty investors tend to seek safe haven assets and the Bund is one of them. Dealers instead of cheapening the curve to take down cheaper supply, they could end up paying higher bond prices for a safer bond!

• Greece Could be Forced to Transfer Real Estate to Troika To Speed Monetization
• ECB Member: Central Bank Low Rate Statements Reassure Market
• Italy Must Meet Fiscal Targets After Abolishing Property Tax
• German Unemployment Rises Slightly in August
• Spain Close to Recession Exit
• EU Economics Official Sees Recovery in 2014
• Greek Finance Minister Confident No New Bailout Needed
• UK Retail Sales Grow in August
• Merkel Regrets Greece Joining the Euro
• German Consumer Confidence Falls Slightly in August
• German Finance Minister Says 11 Billion in Greek Aid Not Unrealistic
• Merkel Wants G20 To Regualate Hedge Funds
• UK Service Sector Recovers to Pre-crisis Level
• BoE Carney Will Push for Low Rates Tomorrow in First Public Speech
• Germany Fin Min Schaeuble Does Not See Future EU Bailouts
• Spain Economy Shrank 1.6 Percent in 2012 0.2 Percent More than Previously Stated
• German Business Sentiment Rises to 16 Month High
• IMF’s Lagarde Warns Central Banks About Ending QE Too Soon
• ECB Members Divided over Room for Rate Cut
• Economic Confidence in Europe Up to 17-Month High

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