Combination of US Jobs and Draghi's Broad Strokes Helps USD

The stronger than expected ADP employment estimate and downward revisions to growth from the ECB has seen the dollar recover earlier losses.  Draghi has indicated that the details of the Monetary Outright Purchases (MOT), which is the SMP2.0, will be released in a separate press release, as will the new collateral rules.  This will of course be scrutinized.                             

We had been looking for the market to be disappointed with what ever Draghi announced today, especially given the key obstacle to implementation--neither Spain nor Italy appear prepared to request the aid.  And that precondition was reiterated by Draghi.                                

Draghi has indicated that the bond purchases will be fully sterilized and could stop if a country falls out of compliance with the MOU that is required.   
 

That the staff GDP forecasts were cut for this year and next are not surprising, given the recent data and the additional austerity that will be implemented in the coming months.

The ECB suspended the minimum credit threshold for bonds of countries participating in the program (MOU, etc).  This is specifically important for Spain, which is one notch from losing its investment grade status for Moody's.      

Turning briefly to the US, we had anticipated the August jobs report would be in line with the private sector growth seen in July.  The ADP data pushes in this direction, though its month-to-month track record is not great.  On balance, this still favors guidance adjustment over new asset purchases, we think.