In July, the European Central Bank President Mario Draghi said that the Governing Council would discuss the future of its €60 billion monthly purchases program in the autumn. Technically, autumn in the Northern Hemisphere will not start until Friday, Sept. 22, so there is a possibility that the topic of quantitative easing tapering may not be discussed at this week’s meeting.
If Federal Reserve policy makers were already starting to question the need for another rate hike this year – and the pace thereafter – then this week’s data won’t have made them feel any more comfortable.
“Sell volatility, buy the dip” has been the investor mindset for some time when it comes to the equity markets. It appears that this mindset is holding firm, after investors brushed away the market uncertainty that was created in the early hours of Tuesday morning, following the news that North Korea fired a missile over Japan.
Following big falls in some risk-sensitive assets on the back of North Korea tensions, a number of global stock indices and dollar currency pairs ended the session with impressive reversal-looking technical patterns as the dip buyers evidently stepped in to take advantage of the lower prices (see the technical outlook section below).
The Jackson Hole Symposium is this week's most anticipated event, in part due to a severe lack of other newsworthy market stories but also because two very important central bankers are scheduled to appear.
After stocks and the dollar surged on Tuesday, following a Politico report that Trump’s team have taken a significant step on tax reforms, the President’s threats on Tuesday night to shut down the government and terminate the NAFTA agreement, were not well received by investors, who responded by dragging both equities and the dollar lower.
Financial markets offered a muted response towards Mario Draghi’s speech in Germany on Wednesday. Investors who were expecting fireworks left disappointed after the ECB chief maintained a safe distance from market-sensitive remarks.