EUR 9.38 For Business Accounts Only

The Morning Track whatever-it-takes

- The Morning Track – Whatever It Takes? by Bob Savage
http://track.com/articles/the-morning-track-whatever-it-takes/

The hope for markets has been that the ECB will fix all number of problems – from the Italian political mess to EU banking to the Repo problems of QE, which have skewed rates lower. The risks remains that hope doesn’t match the reality of a world where many in Europe see tapering of QE as logical and necessary as prices stabilize and growth improves. The ECB left rates on hold -0.4% depo, 0% refi and extends buying QE at E60bn from Apirl to December 2017 – all as expected - but still a tapering and hardly whatever it takes fodder. The news flow before the “whatever it takes” Draghi news conference set the tone as well -
• Moody’s downgrades Italy outlook to negative,
• Better China trade data with exports and imports both higher, but yields jump 18bps in 10Y to 3.76% - most since April
• Weaker Japan 3Q GDP revisions, but better EcoWatchers survey due to weaker JPY, and a poor 30Y auction driving curve steeper
• Bigger Australian trade deficit despite commodity exports,
• RBNZ Wheeler – rates likely low enough for 2% CPI – more hawkish tilt
• Stronger French Business Surveys put BdF 4Q GDP forecasts at 0.4% q/q, even as 3Q payrolls drop off 0.3% q/q.
The headlines highlight the unevenness for markets despite the bigger equity risk-on story, which remains a Trumpflation hope and another larger risk for 2017. With no major news other than the ECB for today, expect this to be a EUR focused day with the weakness in Italy balanced against whatever Draghi says and leaving the USD/EUR at 1.0850 breakout or back to 1.0550 support.