Housing price index, consumer confidence to be released in US; Trichet to speak

Today, in the US the Standard & Poor’s Case-Shiller housing price index, the Chicago PMI and the Conference Board consumer confidence will be published. In normal circumstances, this set of data would have market moving potential.

In particular it would be interesting to see the reaction of markets in general and of the dollar in particular to better than expected US economic data. The combination of reasonably good US economic data with additional support from the Fed might be dollar supportive. This reasoning remains of course valid, but the focus of the markets is currently elsewhere.

In Europe, the November CPI and the October unemployment rate will probably have only a limited impact on EUR/USD trading. More interestingly, European Central Bank President Jean-Claude Trichet will speak during a European Parliament Committee meeting at 16.30 CET. This could yield some interesting comments.

Of course, one can expect the ECB president to defend the steps taken by the EU and the involvement of the ECB in this process. However, it also gives the ECB President a forum to prepare markets for a delay in its normalization (exit) process, if he would intend to do so at Thursday’s ECB meeting. However, it raises the question whether there is any possible way for European policymakers to change the current market sentiment for the better.

If Trichet would indicate a delay in the normalizing of its liquidity policy, investors will probably explain it as a sign of more trouble in EMU financial system. If the ECB continues the exit as indicated until now, it will probably be seen as the ECB obstructing the recovery process in the peripheral countries.

So, unless some ‘deus ex machina’ appears, we assume the market environment to remain euro negative. The talk of EU/ECB officials won’t be able to change this.

Content provided by: KBC Bank