Recap :


So FOMC member Stein resigned today, effective May 28th. This came as a bit of a surprise, though supposedly he would’ve lost his tenure at Harvard if he didn’t return by mid year. In any case, it not clear if the Fed is changing its stance on credit regulation. We are at the part of the cycle where credit quality is deteriorating (although slowly) and the regulators were starting to get concerned: (h/t Danny)

And the NY FRB has been publishing a whole series of blog posts about bank risk.

Separately, the ECB was able to convince more people that it might act today, and it seems the market bought it, at least for now. A real test would be when there is more pressure on global yields, which could come if we get a blowout NFP print tomorrow. Real yields in Europe remain very high – in fact, 5y real yields, as measured in swap space, are in line with the US, even though the ECB is likely a couple years behind the Fed in the hiking cycle.

Note that when asked what would constitute a "too prolonged period" of low inflation, Mr. Draghi responded by offering one criterion: that it was long enough to begin to drag medium-term inflation expectations down. That probably means something like the 5y5y inflation forward (currently at 2.11%) below 2.0%. Given that Draghi also said that he expected April inflation to print higher, however, the ECB probably does not anticipate that to occur.


  • Australia Trade Balance improved to 1200M vs 800M exp and 1433M prev
  • DM PMI:
  1. US Non-Mfg ISM improved to 53.1 vs 53.5 exp and 51.6 prev
  2. UK Services PMI declined to 57.6 vs 58.1 exp and 58.2 prev
  3. Italy Services PMI declined to 49.5 vs 52.3 exp and 52.9 prev
  4. AU Services PMI declined to 48.9 vs 55.2 prev
  5. Japan Markit Service PMI improved to 52.2 vs 49.3


  1. China Non-Mfg PMI declined to 54.5 vs 55 exp. The HSBC measure improved to 51.9 vs 51 prev
  2. India Service PMI declined to 47.5 vs 48.8 prev
  3. Russia Service PMI declined to 47.7 vs 50.4 exp and 50.8 prev

US Jobless Claims rose to 326k vs 319k exp and 311k prev


  1. We are resolute in our determination to maintain a high degree of monetary accommodation and to act swiftly if required.
  2. The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation.
  3. The Governing Council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term.
  4. More verbal jawboning… probably because EU forward inflation swaps are now just above the 2.0% level.
  5. the ECB had a "rich and ample" discussion about a range of tools: a refi cut, a deposit rate cut, QE and extending the full allotment.
  6. QE involving government bonds is still seen as problematic, while QE involving private assets is "hard to design" in a way that "doesn’t pose a risk to financial stability".

Upcoming Data:

  • Fri: US Employment, Canada Employment,
  • Mon: BoC Business Outlook Survey, Australia NAB Business Confidence, Japan Eco Watchers Survey
  • Tue: Canada Housing Starts,
  • Wed: German trade Balance, USDA Report, Fed Minutes, Australia Employment
  • Thu: BoE, US Jobless Claims