US stocks could face volatility this week as US congress debates weather or not to take action against Syria. Support for action is growing according to US Secretary John Kerry, even going as far to say ‘this is our Munich moment’. While no immediate plan is apparent, it is unlikely there we be a large scale invasion or occupation, either way geopolitical tensions remain elevated as does the probability of a risk off move should things escalate, this will once again lead to demand for safe havens in USD, JPY, Gold and likely put some pressure on oil prices.
Friday saw the pound push to fresh lows versus the Euro not enjoyed since late January this year trading at .8392; however any gains for the pound were quickly erased by Friday afternoon where it settled at .8417. The pounds Friday gain versus the USD can be contributed to fewer than expected jobs being created by the US in August versus analysts’ expectations. Sterling’s gains against the Dollar came as some investors unwind long dollar positions following the weak data.
There seems to be somewhat of a divided opinion regarding the timing of the Fed’s tapering plans after poorer than expected jobs data on Friday, with some analysts saying that although job figures were soft, they were not soft enough for the Fed to hold back from reducing the pace of monetary accommodation later this month.
Others suggesting that the data on Friday could push back tapering to October. Ben Bernanke is due to speak about this issue early next week. The USD has enjoyed recent gains against the Euro on the back of tapering speculation with the greenback reaching an eight-week high versus the Euro. There is very little major economic data due from the US today or tomorrow, we will have to wait until Thursday before we see any substantial reports in the form of US jobless claims.
Today sees very little in the way of economic news from the European session. All eyes will be on Wednesday’s Claimant Count Change from the UK due to be announced at 9.30am. Many UK retailers will also be releasing figures that may just indicate just how confident the consumers are in the improving economy, with many analysts indicating a bumper month for business going forward this September.
Last week saw Germany’s bond prices fall, pushing 10-year yields to a 17 month high as ECB President Mario Draghi highlighted that the ECB felt interest rate risk remained to the downside. While we will have to wait until Tuesday before we see any meaningful data from the Eurozone, this will come in the form of French Industrial production, the Eurozone Sentix investor confidence survey is the most appealing release on today’s calendar and is expected to reflect the recent signs of improvement in the region, despite remaining fundamentally weak.