The euro is trading at the lowest level since March 2006 against the U.S. dollar in early trading as currency traders are betting that Wednesday’s inflation reading in the euro area for the month of December will underwhelm and confirm that the European Central Bank (ECB) is preparing to offer additional monetary stimulus in early 2015 at their next policy meeting on January 22nd to help revive growth in Europe and alleviate the risks of deflation.
Inflation has been in retreat mode across the 19 member euro area for months and November’s 0.3 percent inflation reading in the euro area was weak, matching a five year low.
Although Draghi expressed confidence that the euro area’s economy will improve in 2015, he told German newspaper Handelsblatt last week that the risks are higher than they were 6 months ago that the ECB could fail to ensure price stability within its own mandate.
Draghi said that the ECB could add more monetary stimulus in early 2015 to help generate economic growth by launching a € 1 trillion U.S. style quantitative easing program through purchasing government bonds-sovereign debt from the 19 countries making up the euro area.
Traders on Wall Street are returning to their first full trading week of 2015 this week as a Republican majority takes over Congress with fresh hopes of challenging President Obama’s domestic policies ranging from healthcare to the Keystone Pipeline.
President Obama will advocate for his domestic policies during his upcoming State of the Union address on January 20th.
The U.S. December jobs report on Friday and Wednesday’s Fed minutes from December should offer more clues about the shape of the U.S. economy and the overall likelihood that the Federal Reserve will view the U.S. economy as being on the right track to begin raising interest rates in 2015, likely in mid- 2015, according to consensus forecasts.
The U.S. economy is expected to have added 240,000 non-farm payroll jobs in December while the unemployment level is expected to remain at 5.8 percent, according to an early forecast from Briefing.com.
In November the U.S. economy added 321,000 non-farm payroll jobs, the largest gain since January 2012.
Over the past 12 months, the U.S. economy has averaged monthly job gains of 224,000.