Markets will stay alert to any hints on a likely ECB QE announcement on Thursday. France’s president Hollande might have said too much yesterday when he referred to what he later corrected to the ‘hypothesis’ of ECB QE. At the World Economic Forum in Davos on 21-24 January ECB policy is set to be on top of the agenda and other VIPs may have thoughts on what Draghi could do on Thursday.
German ZEW expectations are expected to move to 40 in January from 34.9, as Sentix expectations (which are good at leading ZEW expectations) increased in January. If the ZEW expectations climb higher, it would be the third month in a row with an increase, thereby offsetting a large part of the index’s decline over the course of 2014.
This week’s US data are dominated by housing market releases, kicking off with the NAHB index for January. We expect the NAHB to stay unchanged at 57, which is at the high end of the range where the index has fluctuated over the past one and a half years. Although housing activity has recovered from the doldrums following the house price bust, activity remains depressed compared to previous upturns. We expect activity to pick up some more speed over the course of the year, as we view the current level of residential construction as fundamentally too low.
No Scandi events today. Focus to remain on the impact of the SNB move last week and a likely ECB one later this week.
Read the full report: FX Daily