Eurozone consumer price report is out today. Forecast: +4.0% year-on-year versus 3.8% a month earlier. In the evening, two US figures will be added: ADP employment and the ISM services business activity index.
Politics set the backdrop. In the US, Democrats took both the House and the Senate.
The consumer price index shows how much a typical basket of goods and services has become more expensive. The business activity index is compiled from surveys of purchasing managers: it shows whether the sector is growing or contracting. For a trader, this is an event-driven day: inflation figures move the euro, the dollar and US indices.
What is expected from the Eurozone?
Forecasts diverge on the two indices.
- 4.0% - headline consumer price index (the main measure of inflation)
- 2.5% - core index, unchanged
- 72% - market-implied probability of an ECB rate hike in December
The ECB has already signalled its position in advance. The regulator has said it is ready to raise the rate again if the inflation picture worsens.
Final services business activity indices for the major Eurozone countries and the UK are also released at the same time. The values are clarifying ones; they do not change central bank policy.
Why is Lane important?
Philip Lane speaks at 16:20 Moscow time. He is the ECB's chief economist and a voting member of the board.
His rhetoric is considered neutral, so any shift in wording in either direction is noticeably stronger. It is convenient to keep the schedule of speeches and releases in the economic calendar.
What will the US show?
Two figures on the American economy.
- ADP - 67k versus 90k previously. This is private-sector employment as calculated by the company that processes payrolls for American employers.
- ISM services - 54.8 versus 54.9. A value above 50 means the sector is growing.
Preliminary data is already out. The S&P Global services index fell to 57.9 from 58.8, a two-month low.
The agency sees it differently. Excluding the post-pandemic recovery, these are the best growth rates for American business since the start of 2015. At the same time, selling prices are rising at the fastest pace in more than four years: expensive oil and supply disruptions allow costs to be passed on to the buyer.
What does politics change?
Democratic control of both chambers does not completely tie Trump's hands. He can still impose tariffs and continue the war with Iran. But growth in budget spending is now constrained.
Iran is a separate risk. Escalation becomes more likely now that the elections are over.
How will volatility play out?
Two volatility scenarios.
- Figures close to forecasts. The move fades within the session, and attention shifts to Lane.
- Eurozone inflation or ISM deviate from forecast. Sharp candles in EUR/USD, DXY and US indices with widening spreads in the first minutes.
Key point: the first minutes after the release mean widened spreads, not just price movement. This is a day for those who have decided in advance whether they trade the news or wait.
Do you trade fifteen minutes around the release?
If your trades live within fifteen minutes around the release of the figures, this is a working day for you. Prop firms treat this style differently. At some, entering a minute before the data closes the account; at others, during this window they cut leverage and raise stop-loss requirements. This line of the rules is looked up in advance and for your specific instrument. Selection filters are completed faster than Europe opens.