(menafn – ecpulse)
The countdown has finally come to an end, where markets have been waiting for this busy session since the start of this week; eyes will be focused on the European Central Bank rate decision, Draghi press conference, the Spanish bond sale and finally the financial results of several major firms across Europe.
The European common currency declined sharply yesterday after the flow of downbeat fundamentals from Europe and the world's largest economy, where the downbeat manufacturing data and unemployment from Europe triggered sharp pessimism that spread across markets, dampening demand for high yielding currencies including the euro, the sterling pound and the Australian dollar.
The euro continues the downside movement today ahead of the critical events awaited mainly from Spain, where the nation will sell bonds with two different maturities with fears yields will continue to surge as volatility is still dominating the debt market.
France will auction bonds as well, where the nation will be under test today as the French auctions will follow the Spanish sales and therefore any deterioration in the sentiment might trigger higher yields on the French bonds since speculation indicates that Spain will not run a successful bond auction today.
As we mentioned earlier the focus will remain on Spain, where the nation will host the European Central Bank rate decision in addition to the press conference following the decision.
The European Central Bank Governing Council most probably will leave the benchmark interest rate unchanged for the fifth consecutive time as the bank attempts to control inflation and boost growth at the same time; however the question to be asked here is what's next for Europe and the euro-area region? The European Central Bank must provide further easing in order to control the contraction in growth, with expectations deep recession is around the corner.
But on the other hand, we cannot confirm that easing is still on the table, where we all know that that European Central Bank main mandate is maintaining price stability and further easing might affect prices and push inflation higher, therefore, we expect the European Central Bank to continue the wait-and-see stance for the fifth consecutive month.
Markets will also track Draghi's press conference today, awaiting explanations regarding the current economic situation, where investors will be paying attention for whatever the President will say regarding Spain, the debt market in addition to any signs of further easing, cuts or rate hikes.
Moreover, several large companies are to report their financial results for the first quarter of 2012, where markets will be tracking the results for more indications whether Europe is heading towards a deep phase of recession or only a mild recession.
In general, other fundamental will be released today; however, the main focus will be on the services sectors in the United Kingdom and the world's largest economy, but the effect will be shallow as the European Central Bank rate decision will have the most effect on markets and will pull most of the attention as well.