Asian stocks and the markets in general experienced choppy trading overnight as investors await the key meeting held by the European Central Bank later today (Thursday). While uncertainty and anticipation for an ECB announcement to buy bonds pushed some investors to the dollar, talk the Fed may stimulate its own economy initiated some selling and the US Dollar index was unchanged at time of writing.
Asian trading on Wednesday has seen Hong Kong’s Hang Seng Index decline 0.18%, Australia’s S&P/ASX200 increase 0.77%, whilst Japan’s Nikkei 225 Index was down 0.18%. Many investors appear to be preparing for the outcome today but driving the markets was South Korea reporting that its economy is growing at slower rate than previously thought and a surprise fall in the unemployment rate in Australia.
South Korea’s Q2 growth fell short of the forecasts, posting a 2.3% growth rate, which is slightly less than the predicted 2.4% growth rate. Compared with Q1, the economy expanded by 0.3%, which is lower than the estimated 0.4% expansion. South Korea’s growth over the last few years has been fuelled by its exports sector, which accounts for nearly 50% of its total economic output. However, slowing growth in key export markets such as the US and the Eurozone has had an impact on the demand for South Korean goods, hurting the country’s economic growth. Exports dropped 1.4% in the second quarter from the three months prior, according to the data published by the Bank of Korea and the weak data may prompt the South Korean government to boost stimulus measures.
Following on from the previous day’s news that Australia’s economic growth rate slowed in Q2 after a fall in global demand for its resources and weak domestic consumption. Australia surprised the markets by announcing an unexpected fall in its unemployment rate last month. The Australian Bureau of Statistics said that the unemployment rate fell to a seasonally adjusted 5.1%, from 5.2% in the preceding month, after analysts had been expecting the Australian unemployment rate to rise to 5.3% last month. The Aussie regained most of its losses from yesterday and was 0.28% up against the USD.
Today is going to be all about the ECB meeting later today. It was reported earlier that the ECB was planning to launch “unlimited, sterilized” bond purchases, allowing the monetary authority to purchase Spanish and Italian debt (or any other debt) with money currently already in the financial system and not freshly printed money as carried out by the U.S. Federal Reserve. These plans, known as the ‘Monetary Outright Transaction proposal’, will government bonds carrying maturities of up to three years being purchased.
Thursday promises to be a very busy day for traders with focus firmly on the potentially make or break ECB meeting today. Interest rates are expected to remain unchanged in the Eurozone as they are in the UK, but watch out for jobless and Nonfarm employment change figures in the US. Expect plenty of volatility in the EUR/USD pairing today.