The ECB is not going to halt the bond market purchases yet, but they will probably reduce the volume. The monthly demand of the bank on debt market in the amount of 60 billion Euros should begin to decline in the near future, as the European economy shows steady growth rates. Although, inflation continues to lag behind the general trend. According to Mario Draghi, reduction of the program will be extremely slow so the first steps toward tightening will probably have a moderate effect on the bond market and the Euro. Next target may be a monthly volume of 40 billion Euros, while the rate will remain at the same level for at least another year.
According to the chief economist of the ECB, Peter Pratt, the volume of buying should be adjusted taking into account market volatility and preserve the character of long-term support, so that investors will appreciate it.
EUR/USD is stable, despite the fact that US currency is shrivelling against other currencies before the release of the September consumer inflation data. Upbeat figures on unemployment benefits supported Dollar on Thursday, but high employment is no longer so easy to affect market expectations. Upbeat PPI posted on Thursday may be a good signal for consumer data, which also turned out to be better than expectations, but more largely due to natural disasters. Consumer inflation for September is likely to have muted impact on markets since it lacks valuable findings on underlying growth issues due do skews from Irma and Harvey consumption boost. Therefore, the market may be not ready to spur sustainable Dollar rally and its wise to wait for the news on Trump’s tax reform. Officials of the Federal Reserve continue to remain data dependent in the assessment of inflation and do not make bold forecasts, but the chances of a December increase looks converging to 1.
Oil and Chinese data
Chinese imports accelerated and exports slowed the growth rate. Statistics helped strengthen the Oil market due to the prospects for increased demand, the Australian currency added 0.3% since Australia is one of China’s main partners. The growth of consumption in the Chinese economy is a strong external factor for the leading economies of the world including Eurozone and US, and as an indicator of global recovery will allow officials to make more confident decisions on monetary policy. Oil reserves in the US decreased by 2.75 million barrels in the week ending Oct. 6, although the forecast was only 2 million barrels. Oil production in the US also declined. The Baker Hughes report on changes in drilling activity will allow us to assess the vigour of the actions of the shale sector in the fight for the Oil market share.