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Trending Economic: European session Brief (30 November 2015)

Volatility should pick up today as many in the U.S return from the Thanksgiving holiday which was observed towards the end of last week, as expected markets were very subdued due to lower liquidity. It is also the case that the economic calendar is significantly heavier this week, with the all important final ECB press conference of the year (1330GMT) as well as the Minimum Bid Rate (1245GMT) due out on Thursday. Further easing is near enough fully priced in, however the exact measures that the ECB will use still remains uncertain and as we mentioned last week a two tier deposit system is possible as well as an increase of the current asset purchase programme. We remain bearish on the Euro heading into Thursday and in terms of today’s data points we have already seen the release of German Retail Sales m/m which came in at -0.4% vs. 0.3% expected and 0.0% previously. The other main release today will be German Prelim CPI m/m (tentative) with expectations of a release around 0.1% vs. 0.0% previously.

In terms of the US, the Federal Reserve Board will today consider a proposal by congress to curb the current emergency lending powers. The proposal involves future emergency lending to be only “broad based” rather than specific like it was during the 2008 crisis for firms such as AIG and Citi. The main data points to be aware of out of the US today will be Chicago PMI (1445GMT) and Pending Home Sales m/m (1500GMT), with expectations of releases around -15.2B and 54.3 respectively. The Dollar index has pushed higher to 8 and ½ month highs as optimism builds for the Fed to lift rates by year end.

The IMF is expected to today agree on adding the Chinese Yuan to its reserve basket (Special Drawing Rights Basket), which will acknowledge the Yuan as a major global reserve currency along with the Euro, the Dollar and Sterling.

In the energy sector, attention will shift to Friday’s key meeting of OPEC Oil ministers. Many will recall OPEC’s previous decision to defend market share, led very much by Saudi Arabia, which caused a sharp fall in Crude prices. However recent statements by officials points to a potential shift in attitude by OPEC member nations and it is the case that OPEC’s research team expects Oil demand to rise in 2016 by around 1.25 million barrels per day, however many claim that this forecast is too optimistic.