The euro had a positive day as hopes rise for a larger-than-expected interest rate rise. This was despite the risk of a political crisis in Italy leading to an economic catastrophe.
Yesterday’s biggest data release was consumer confidence across the eurozone, which was lower than expected at -27.
Today three big stories dominate. The first is, of course, the interest rate decision from the European Central Bank, which Christine Lagarde has already indicated will the first rise in a decade, an increase of 0.25%. Even that level is now likely to disappoint the markets after hopes of a 0.50% rise have risen. Given that the inflation in the eurozone is largely being caused by external factors such as higher fuel prices, the effect of higher interest rates will in any case be limited.
Tomorrow there will be S&P Global/CIPS PMI across the eurozone and for Germany. Last month German manufacturing PMI was 52, but this is expected to slip slightly this time around.
There will also be close attention on Italy, as Mario Draghi considers his future following his coalition falling apart.
Thirdly, the Nord Stream gas pipeline has been switched back on again, much to German industry’s relief.
