EUR Debt Relief Belief

This is the market move that investors should have been treated to earlier in the week, rather than a painful consolidation of FX pricing. There is a lot in play today. Investors will be treated to a bit of posturing, much rhetoric and little substance from three Central banks rate decision announcements. Some sweat and tears have already been spilled as the worlds awaits the outcome of Greece’s debt-swap deal deadline later today (details tomorrow) and finally when all is said and done, markets will begin guesstimating tomorrows NFP and try to position accordingly after today’s claims release.

Investors are becoming increasingly optimistic that Greece’s debt-swap deal will go through, clearing the way for the country to receive the second tranche of its bailout funds. Thus far, it has been noted that +60% of investors have indicated that they will participate in the PSI, and helping “pave the way for the PSI to continue, even if the collective action clauses have to be triggered.” The deadline is 3pm this afternoon, with Euro-finance ministers expected to decide tomorrow whether to release the +EUR130b in bailout funds.

The ECB (+1%), BoE (+0.5%) and BoC (+1%) are likely to keep policy on hold later this morning. While still basking in the glow of the strong uptake to its most recent LTRO program, today’s ECB meeting is unlikely to see any major announcements. However, Draghi may provide some indication on the prospects for more LTRO operations going forward. With the BoE set to complete its latest +GBP50b in asset purchases in May, recent rhetoric from MPC members indicate that they judge the current policy as appropriate. The ongoing improvement and strength of UK data with support that. In Canada, Governor Carney will not want to be upsetting anyone. Market consensus has the BoC standing pat with a slight chance that the decision might also feature a small growth outlook upgrade. No matter what happens, the loonie should trade in a tight range today ahead of US and Canadian payroll data tomorrow.

It seems that you cannot keep Bernanke away from the printing press for very long. Reports suggest that the Fed is considering a number of QE approaches, including operation twist “Mark II,” a sterilized bond purchase program. This would see the Fed print money to buy long-term bonds, but absorb the increase in liquidity through new open market tools. All of this will and is obviously weighing on the big dollar.

Just when you think when you have caught your breath, the markets focus will quickly turn to tomorrows fundamental releases. Yesterday’s slightly better than expected ADP report will be measured up against this mornings jobless claims release. Expectations are looking for a weekly decrease to +345k from +351k. Data in line would suggest an extension of the current trend and obviously a precursor to tomorrows NFP release (+208k and +8.3%).

Proof of perseverance in the overnight session has been the AUD. The currency rallying indicates somewhat the markets depth of relief belief. Data down-under indicates that employment fell -15.4k last month, much weaker than the consensus forecast for +5k. Digging deeper, the loss was seen mostly in part-time employment as full time employment was flat on the month. Analysts note that the unemployment rate rose slightly, but “remained in the +5.0-5.2% trajectory and the rebound in hours worked more than offset the losses in part-time employment.”

Other Links:
ADP Adds +216k Jobs