(menafn – ecpulse)
With the start of another week, eyes will be tracking the huge load of fundamentals and events expected this week, where during our session the focus will be on inflation data from the euro-area region and the United Kingdom in addition to confidence data and other major events such as the several debt auctions from Spain, France and Germany, awaiting Draghi to speak in Frankfurt on Tuesday.
The focus returns to inflation and rising prices, where markets after watching inflation-linked data from Germany and the United Kingdom on Friday will closely track any changes in inflation in the euro zone and U.K. in attempts to predict what policymakers might do next to control inflation and revive growth at the same time.
The European Central Bank sees that inflation is likely to remain above the target of 2.0% as upside pressures on prices prevail. However, over the medium-term risk to inflation remain broadly balanced, while the ECB has all the tools available to fight inflation, but still the pressures are to ease and inflation will fall below the target early in 2013.
On the other hand, the ECB sees in regards to growth that downside risks remain evident, while rising inflationary pressures keep on dampening growth and spending, where rising prices have pressured households' incomes sharply and now the austerity adopted across Europe might hurt growth further, the thing that might push the debt crisis to escalate and spread further to large economies such as Spain and Italy, the largest economies in the region after Germany and France.
In addition to inflation, eyes will track this week confidence data from Germany and the euro zone, where the IFO and ZEW survey are expected to show further improvement in the sentiment as markets started to normalize, but still rising tension in the debt market may have affected the confidence sharply as renewed fears and concerns regarding Spain might trigger instability and volatility again.
The focus after then will shift to the United Kingdom, where all eyes will be closely watching the jobs report from the royal economy, where fears exist in the market that unemployment in the United Kingdom might have expanded further in the three months ending in February as the government keeps on adopting further austerity in attempts to trim the budget deficit and push the debt-to-GDP ratio lower.
Unemployment in the United Kingdom reached a high of 8.4% last month.Spain will be under the microscope this week, where all markets are focused on this economy, which is probably the next victim of the debt crisis, especially after yields kept on rising during the past week, adding more pressures on the struggling nation to handle the existing huge amount of debt.
Spain, France and Germany will auction bonds this week, with eyes tracking any changes in the sentiment in the debt market, which deteriorated in the past week sending the Spanish bonds south as yields incline several times to records; however, Spanish auctions will be critical as the nation will not be able to manage unsustainable yields while markets bet that rising yields might force Spain to follow Greece's steps into bailout.
In general, we expect volatility to remain evident in the market with the huge load of fundamentals and events awaited from the euro zone, United Kingdom and other major economies, where markets will be searching for any signs of stabilization in the debt market, with expectations the ECB might revive the bond-purchases program again.