Recap 3-07-13


Market expectations following the ECB press conference appears to have shifted once again. With data weak and tensions from Italy, the market was expecting some sort of easing – either a cut in one of the policy rates or some sort of easing of collateral requirements. However, the ECB delivered neither, which induced a sharp round of profit taking. With little impetus for a further rally in the near term, the correction in EU rates could continue a bit further.


  • US Jobless Claims dropped to 340k last week vs 355k exp and 344k prev
  • BoE left policy unchanged as exp. Market had expected a small chance of a further ease.
  • ECB left policy unchanged
  1. Updated projections: growth -0.5% vs -0.3% prev, 2013 inflation projection unchanged at 1.6%
  2. Draghi said that a negative deposit rate could have “serious unintended consequences” and would lead into “unchartered water”.
  3. “Now, on credit and fragmentation … we are not committing or planning anything special”.
  4. The Governing Council did consider a rate cut; the decision not to cut was by prevailing consensus (not unanimous).

In Skirakawa’s final meeting before new leadership takes over at the BOJ, they voted eight-to-one against Shirai’s proposal for open ended asset purchases to start sooner than the 2014 date along with communicating the central bank’s stance towards achieving a 2% inflation target more clearly.

Upcoming Data:

  • Thu: BoJ, French Employment, BoE, ECB, US Unit Labor Costs, Jobless Claims, Fed publishes stress test results for US banks
  • Fri: Japan Eco Watchers Survey, China Trade Balance, Canada Housing Starts, Employment, US Employment, Banxico
  • Weekend: China Data
  • Mon: German Trade Balance, RICS House Price Balance, Australia Business Confidence
  • Tue: US Retail Sales, Oil Inventories, Australia Employment