European Futures Lower | Investors Digest Fed and ECB Message

Posted by Naeem Aslam | 15/12/2017 07:40

US tax overhaul bill threatened by Republican Senator
Investors diogest Federal Reserve and ECB events
US consumers assured about their spending  

European futures are trading lower and failed to pick up the momentum from Wall Street. Thanks to Republican Senator, Rubio, who threatened not to back the tax overhaul bill. He wants the Senate leaders to provide more child tax credits. Investors are digesting this message along with the new development from the Federal Reserve. Combination of these two factors are having an adverse impact on the sentiment among traders today. If there was one theme which remained prominent and helped the US Markets to post record highs throughout this year, it was the hopes around the US tax overhaul. Investors pilled their bullish bets on the hopes that it will help the US economy to grow. 
However, as we move closer to 2018, traders aren’t really that optimistic and a decent majority could start to take their profits off the table. We have seen eight years of the bull rally since the financial crisis and this very fact is going to keep them in their cautionary mode.   
US Data
The strong US retail sales number has confirmed that the US consumers are a lot more assured about their spending habit. We have not seen this strong pace of strength for the US retail sales data since 2012. Of course, Black Friday offers has a lot to do with the US retail sales data, but it is the moderate growth in the wage growth which is fuelling the retail sales. Improving retail sales number along with US tax overhaul would help Wall Street major indices to post another record highs.
No bang, no drama from the ECB today. Traders have shown no reaction and all eyes will be on Draghi’s speech, because it is only his press conference which can bring some life to ECB’s event. The ECB’s staff forecast and what exactly the ECB is thinking could be judged by this press conference. Eurozone’s economy has been on fire since this year and especially this is true when you see countries like Greece posting positive GDP. Thus, there is less incentive for the ECB to stay overly dovish with their approach.
Draghi’s overall tone was more optimistic today and this has helped to the Euro. He increased the growth forecast for 2018 to 2.3% which was well above the previous number of 1.8%. Anything below 1.8% or at the same level would have sent the message that the bank is not confident but the number of 2.3% sends the signal that things are on fire. However, on balance you could say that Draghi wasn’t overly dovish and this really pays the way for the euro and ECB’s monetary policy.

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