The early morning session featured the European Central Bank's decision on interest rates for the month that had some analysts looking at the possibility of a change in policy for the first time since November 2013. In the United States we saw the release of the weekly jobless claims data as well as our trade deficit numbers which hold slightly more than normal significance with the monthly U.S. Jobs data less than 24 hours away from being released.
The ECB and its President Mario Draghi announced this morning that they intended to keep rates unchanged at 0.25%. This was widely expected except to say that for the first time in many months there was a small chance that we could see the ECB make some sort of policy change in an effort to produce some modicum of inflation in there stagnating economy. With the rate at .24% it would seem more likely that the central bank would turn to some more unconventional forms of easing to provide liquidity. In this scenario, we can expect the ensuing press conference featuring MR. Drahgi to potential hold more insight into the mind of the ECB than the actual report. In fact, we have heard Mr. Draghi talk today about the willingness of the bank to embrace these unconventional methods to achieve her stated mandates. Critics of the ECB would probably point out that the ECB continues to pontificate about action without every actually taking any (ecb-rates). The market action in the Euro Currency has been rather subdued though we did see the market rally (a normal reaction in a currency to tightening or lack of easing action) only to falter as Draghi’s press conference continues dropping down to session lows featuring nearly a dollar range. With the Euro Currency having spent so much of the past month grinding to the upside there could be some room to the downside, particularly if the rhetoric continues to be leaning toward deflationary fears and the now ‘not so unconventional’ QE methods that a central bank has a tool when interest rate manipulation is no longer an option.
Here in the United States we saw the Initial Claims data rise modestly to 326,000 for the week and a decline in the trade deficit to -42.30 billion. Normally the weekly claims data is not a major market event, however, with the headline jobs data due out tomorrow, some traders may lend it more credence than usual. It seems that while this number is a slight negative from the report last week, it remains to be in the range that would indicate that the recovery of the jobs market continues. We will have to wait until tomorrow to verify that contention, though the data we have seen this week would seem to indicate that the estimates in the area of 190,000 new jobs does not need to be revised prior to the release.
The U.S. trade deficit showed a decline in exports compared with imports at a rate of -42.03 billion dollars. This is a negative to the US economy that saw the previous two trade deficit numbers show continued strength as exports climbed pushing the deficit into the mid-30s. This data is of particular importance for the recovery of any economy and yet not as highlighted by pundits and traders alike. Much as the ECB (mentioned above) is concerned with her rising currency due ti its ill effects on the import export ratio (trade deficit), the US is equally concerned about our industries ability to market share in foreign economies. Nonetheless, the S&P 500 (CME:SPM14) continues to trade higher in a grinding effect, seemingly putting out new highs regardless of the data reported.