Today's big event is the ECB meeting but there’s also weekly jobless claims and oil inventories data as well as earnings from Oracle and Peloton.
The euro has dropped back from 1.20 to a 1.17 handle over the past week going into this ECB meeting. Part of that was the pretty blatant jawboning by ECB chief economist Philip Lane, who said “the euro-dollar rate does matter.” So what did Lane want us to take away from this a) the ECB don’t like the euro strength and b) they might act to stop it.
I would question both, the euro has had a good run this year but its only 1.20. A decade ago it was at 1.60. Also, what more is the ECB really ready to do? They really don’t have the ammunition to do much more. And to that point, EUR/USD was back well over 1.18 today on a report from Bloomberg that ECB officials have become more confident in their forecasts, suggesting they don’t see the same level of downside risks as before that might have caused more policy easing.
So if the forecasts a tilted hawkish, how can the ECB bend to the concerns of Lane and other policymakers? Well one way could be to hint that it will follow suit with the Fed and make its own pivot towards AIT – average inflation targeting.
Oracle stock is up 7.5%, slightly outperforming the S&P 500 but it hasn’t participated in the furious rally seen in other stocks. Earnings are expected to rise over last year with sales remaining flat.
Peloton on the other hand has been a market-darling during the COVID-19 era given the shutdown to gyms. Demand for working out from home has gone through the roof and analysts expect it to have taken Peloton earnings with it. The main pause for thought it to whether Peloton could actually meet the demand for its equipment given logistics issues and whether that demand is about to flag now that lockdown restrictions are lifted.
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