It is a rare month indeed that the U.S. "jobs report" is NOT the most important report of the month. It is always released on the first Friday of the month, which would be this Friday. However, the European Central Bank (ECB) will make an announcement on Thursday that over-shadows our "jobs report."
Europe's GDP growth has stalled. One reason is that the euro has become too expensive, which makes their exports more expensive to buyers in the U.S. or Asia or anywhere else. Decreased exports means decreased jobs. Therefore, to weaken the euro, it is expected that the ECB will increase the money supply, possibly by reviving its long-term-refinancing-operation which allowed the ECB to lend against different types of collateral, or decrease the already painfully low interest rates even more, maybe even negative interest rates. Instead of being paid interest by the bank, just imagine paying the bank to hold your money for you! That is very rare but may happen in Europe on Thursday.
All that sounds good if you own European stock, but how does that impact the U.S.? If the euro depreciates, then the dollar will appreciate. This means our exports will become more expensive to buyers in Europe. This ain't good!
Now, just imagine you are Fed head Janet Yellen. Her efforts to eliminate quantitative easing (QE) and start shrinking the Fed's balance sheet are expected to strengthen the dollar -- hurting our exports. She will be under pressure to delay, which means she will raise our interest rates later, instead of sooner. And, that is a good thing!
Europe's GDP growth has stalled. One reason is that the euro has become too expensive, which makes their exports more expensive to buyers in the U.S. or Asia or anywhere else. Decreased exports means decreased jobs. Therefore, to weaken the euro, it is expected that the ECB will increase the money supply, possibly by reviving its long-term-refinancing-operation which allowed the ECB to lend against different types of collateral, or decrease the already painfully low interest rates even more, maybe even negative interest rates. Instead of being paid interest by the bank, just imagine paying the bank to hold your money for you! That is very rare but may happen in Europe on Thursday.
All that sounds good if you own European stock, but how does that impact the U.S.? If the euro depreciates, then the dollar will appreciate. This means our exports will become more expensive to buyers in Europe. This ain't good!
Now, just imagine you are Fed head Janet Yellen. Her efforts to eliminate quantitative easing (QE) and start shrinking the Fed's balance sheet are expected to strengthen the dollar -- hurting our exports. She will be under pressure to delay, which means she will raise our interest rates later, instead of sooner. And, that is a good thing!
