Holiday Season Kicks Off
November 27, 2015
Wall Street is on holiday, one of the few days of the year that all US markets are shuttered. There is little to no data due in the European session and global volume is extremely light. Friday is a partial holiday in the US with most traders out of their offices but Wall Street will be open for a few hours.
The dollar gained and the euro fell as far as a seven-month low following a Reuters report that the European Central Bank is weighing further easing monetary policy soon, including buying more debt and charging banks for hoarding cash.
The policy divergence between the ECB and the Federal Reserve, which is seen raising rates as soon as next month, helped propel the dollar index to its highest level since March, which pushed oil and commodity prices sharply lower.
European stocks rallied and Wall Street was little changed, leaving an MSCI measure of equities globally up 0.2 per cent. Data showed a decline in US jobless insurance applications, while business investment is poised to rise.
“The bias of the ECB is to continue to lean towards a policy of easing; with monetary policy being what it is it will continue to keep equities as the asset class of choice,” said Matthew Kafuffle, portfolio manager at Federated Investors.
The euro is trading at 1.0615 down 9 points for the day while the US dollar holds just below the 100 mark.
The euro is heading to parity with the dollar — and soon, according to analysts at Goldman Sachs. The euro dropped back below $1.06 for the first time in half a year on Wednesday and it’s been weakening from about $1.13 in early October.
A lot of analysts got excited about the euro reaching $1 early this year, immediately after the European Central Bank introduced a larger-than-expected quantitative easing program. Though the euro appreciated in value over the summer, Goldman’s analysts say that parity has just been delayed a little.
Traders are preparing for the new month as the end of the year grows closer. December has two hotly anticipated central banking highlights, with the decision meetings of the Federal Reserve and the ECB.
The two monetary authorities are likely to diverge. The Fed has made it clear that its next move will almost certainly be to tighten policy with an interest rate hike, while the ECB might cut rates even further, and seems bound to expand its quantitative easing program.