After a rather subdued session in Asia overnight we are set for the data to start today and liven up proceedings as we go through the European trading session.
Today also sees the start of the Fed’s two day policy setting meeting, with the rate decision coming tomorrow evening at 7pm.It’s going to be the PPI readings that has everyone in focus throughout the day as the numbers come in from Europe, the UK and the US, but it may not necessarily bring the big market swings as volume remains particularly low. There are two reasons for this, first is seasonal, as the further we get into December the lighter the trade will get, but there is also the Fed factor. Despite the Fed looking more or less certain to raise rates tomorrow, there is always that degree of caution ahead of the final reading, add the ECB to the equation and you get some cautious traders. There is also the ZEW survey set for release at 10am this morning, which all in all marks the start of a data heavy day where volume could still well be thin.
There is renewed focus on the US tax plan this morning after yesterday saw 5 European finance ministers, including UK chancellor Phillip Hammond, write a letter to US treasury secretary Steve Mnuchin outlining issues regarding some elements of the tax reform. It has always been Donald Trump’s plan to put American business first, however in Europe the feeling is that this is being done a the detriment to European companies. Some aspects of the President's new tax plan, of which there are currently two versions, go as far as to impose tax breaks for those companies doing business with US firms, a move that European leaders feel will greatly harm European companies. The letter also had a thinly veiled threat in it stating that legislation could well be taken in Europe to ensure companies are not hit by the change in tax law.
There should be no real surprise that Trump is putting America First, but the statements from the EU finance ministers show that they are not willing to stand by and let the US have a free ride when it comes a tax reform bill that will harm European interests. Tax plans can be very touchy ground, and the ministers do insist they are not trying to intervene in a domestic tax debate. However they can insist all they like, they are trying intervene in the plans, however only in a bid to protect the companies they feel are being unlawfully punished if not trading with American firms.
Later this afternoon Mario Draghi will speak to add to today’s docket, however with the ECB rate decision due on Thursday, with his accompanying press conference we are not likely to here too much on policy. However as always traders must be aware that he could still move markets, especially as volumes remain thin.