The safe haven pair US Dollar and Japanese Yen (USD/JPY) edged northwards in the Asian session as mixed Chinese trade data revealed that exports jumped 9.5% – smashing forecasts of 7.2% – while imports fell by 2.1%. This was significantly worse than the 0.1% increase expected.
The Australian ASX 200 pared losses, advancing 0.33% after a 3% selloff on Friday. S&P 500 futures drifted lower in low volume trading owing to the public holiday. US markets are shut for Labour Day. Gold traded back below $1,930/oz and oil slid 1.1%.
Looking ahead, the economic calendar is sparse with just Irish second quarter GDP to focus on. Investors’ attention will now turn to the European Central Bank’s monetary policy meeting on Wednesday.
ECB Staying Pat May Weigh on EU Stoxx 50
Isabel Schnabel’s recent remarks that “as long as the baseline scenario remains intact, there is no reason to adjust the monetary policy stance” suggest that the ECB is satisfied with current policy settings.
Even though the ECB’s policies were based on June predictions Schnabel was confident that a second national lockdown is unlikely despite rising coronavirus infections. This was the same assumption in June and indicates that the central bank could hold off from using more monetary stimulus fire power at the September 10 meeting unless a rise of Covid-19 infections forces regional governments to impose lockdown restrictions.
The spread has been widening between Italian government bonds and German bonds, so the lack of ECB action may put investors off and spark a deeper drop in regional asset prices.
That said, ECB Chief Economist Philip Lane’s comments highlighting the recent movement in the price of the Euro suggests that policymakers were becoming more sensitive to the Euro ’s strength and its impact on the regions exports. The EUR/USD exchange rate rallied to a two year high on September 1.
Schnabel confirmed that changes to policy are not on the cards right now. However she also said pointed out that there could be changes and or surprises at anytome which could require policy to be adjusted.
With this in mind, Europe’s benchmark EU Stoxx 50 index may trend lower if the ECB stays pat on policy at the September meeting.
