Euro a touch softer ahead of ECB

The euro is a touch weaker against the euro ahead of today’s key ECB meeting. The single currency briefly dipped below $1.10 late yesterday evening and is trading around this level this morning. Sterling showed little reaction to the Scottish court ruling that the proroguing of Parliament was unlawful (the UK’s Supreme Court will hear a Government appeal next week), or to the release of ‘Operation Yellowhammer’, which outlined the worst-case outcome in the event of ‘no deal’ Brexit (obviously the details weren’t pretty)

Sentiment in equity markets has improved over the past couple of days, as China said it would exempt some US goods imports from tariffs and step up purchases of some US products. At the same time, Trump has said he will delay an increase in the tariff rate on Chinese good imports by a couple of weeks, partly as a ‘gesture of goodwill’ to the People’s Republic of China as it celebrates its 70th anniversary on October 1st. (Experience suggests any ‘truce’ between the two sides should be considered an uneasy one)

Ahead of today’s ECB monetary policy announcement, the Financial Times says the central bank should not disappoint market expectations and should deploy its full toolkit, arguing that the costs of doing too much are less than the costs of doing too little. The ECB is probably already on board, with Draghi noting not so long ago that the ECB is not resigned to having too low inflation “forever or even for now”, hence it seems likely to cut the deposit rate further into negative territory (from the current -0.4%), leave the door open to a further reduction if necessary, and announce it is to restart its monthly bond purchases

Data due today include industrial production in the Euro Area, and  CPI inflation in the US with the consensus expecting the core rate of inflation to have nudged up to 2.3% in August, its highest level since July of last year