Draghi Says

The euro has extended its gains as ECB President Draghi makes his prepared remarks. There is nothing very surprising. While recognizing that the surveys show some improvement in sentiment indicators, it will "very closely monitoring economic data". This has been a tell for a rate cut, especially if the next batch of economic data disappoints.

The staff forecast revisions were minor and this means that the economy has unfolded largely as anticipated. This year's GDP was shaved to -0.6% from -0.5%, but next year's forecast was increased to 1.1% from 1.0%. The inflation forecast was lowered to 1.4% from 1.6% here in 2013 and left unchanged in 2014 at 1.3%. In a nutshell, the ECB expects the economy to stabilize and recover as the year progresses.

It is clear from Draghi's comments that broader discussions took place. We think it would be unreasonable to expect any less. Of course, the monetary officials want to discuss the range of possible actions, but a discussion is not doing.

The euro has rallied and European interest rates have generally ticked higher as Draghi spoke. The euro extended this week's gains to almost $1.3170. We look for selling to emerge ahead of the $1.3200-20 cap. There is really nothing new in Draghi's comments and there was no new action. The market seemed to have been moving in this direction in any event. 

Tomorrow's US employment report is now the next important driver. Weekly initial jobless claims fell, though the four week moving average rose for the fourth consecutive week.