Is the euro going to fall again today? Focus on developments in Germany and the ECB! "What to watch on May 6 and the event schedule"
Yesterday there was a sharp drop in the euro.
Unexpectedly, Germany has put a brake on the ECB's monetary policy.
The euro, which was already in a weak position, saw accelerated selling after Germany's Constitutional Court ruled that monetary policy is unconstitutional.
Apart from the euro, crude oil prices rose, lifting energy-related stocks, and Western markets also increased.
◎ Today's points of focus
1) ECB vs Germany
Yesterday, Germany's court suggested that the recently announced ECB monetary policy might be unconstitutional, causing the euro to plunge.
The euro area has long seen a deep divide between austerity advocates in Germany and expansionist proponents in Italy and other countries; the ECB's monetary policy has always been a point of contention.
If austerity advocates prevail, countries like Italy and Spain, which favor fiscal expansion, may grow discontent with the EU, and there could be momentum for leaving the EU.
Because the policy was framed to be friendly to fiscal expansion in the recent move, it is thought that Germany, a pro-austerity country, is angered this time.
That said, it is unlikely that monetary policy will be changed, and it seems the situation will put the policymakers in a tough spot.
It's hard to imagine a quick solution; either waiting for a vague outcome to become clearer or negotiating a compromise through talks, and in either case it will take time.
In the meantime, related statements are expected in Europe.
The euro could plunge depending on what is said, so caution is required.
2) Crude oil prices
Oil prices rose sharply yesterday, with Brent crude briefly touching $30 per barrel.
As economic activity appears to be resuming, the rise is driven by expected higher demand, and it remains to be seen if this trend will continue.
If prices are rising merely on expectations of higher demand, a retreat in expectations could trigger another sharp drop.
Also, the weekly crude oil inventory data is due today.
If inventories rise more than expected, crude prices could fall again.
The rise in crude prices has been linked to a rally in energy stocks, so a drop in crude prices could likely pull stock prices down as well.
Today, attention remains on crude price movements.
3) ADP Employment Report
Today serves as the prelude to Friday's employment data with the release of the ADP employment report.
The expected figure is a loss of 20 million jobs, an enormous number is anticipated.
We will be watching to see whether such a figure occurs and how the U.S. dollar will react to the result.
◎ Today's economic calendar
Wednesday, May 6
07:45 NZDNZ Employment Change & Unemployment Rate
10:30 AUD Retail Sales
10:45 CNY Caixin Services PMI
16:45 EUR Italy Composite & Services PMI (revised)
16:50 EUR France Composite & Services PMI (revised)
16:55 EUR Germany Composite & Services PMI (revised)
17:00 EUR Euro Area Composite & Services PMI (revised)
17:30 GBP Construction PMI
18:00 EUR Euro Area Retail Sales
21:15 USDADP Employment Report
22:00 USD Barkin/Richmond Fed President Speech
22:30 EUR Banque de France Governor speech
23:30 USDCrude Oil Inventories
Thursday, May 7
02:30 USD Atlanta Fed President Speech
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