As widely expected, the European Central Bank opted to keep interest rates unchanged, with the refinancing rate (0.05%), deposit facility rate (-0.2%) & marginal lending rate (0.30%) all on hold in the wake of its April policy meeting. Despite the ho-hum decision, there were some unexpected fireworks (or more accurately, confetti) in ECB President Mario Draghi’s subsequent press conference.
Hopes were high heading into today’s U.S. Retail Sales report, with analysts expecting that the primary measure of the consumers’ health would bounce back to 1.0% m/m after three consecutive declines of more than -0.5%.
Euro zone businesses ramped up activity this month, just as the European Central Bank starts printing money to spur growth and inflation, while a slowdown among Chinese factories has fueled calls for more stimulus there.
The dollar may have made a comeback a mere 24 hours after the FOMC meeting: It fell to a low of just over 1.09 versus the euro last Wednesday before clawing back some losses to close at 1.0660 on Thursday. However, we think that the dollar could become increasingly at risk from sell-offs in the coming weeks, and bulls need to get used to the dollar no longer moving higher in a more-or-less straight-line fashion.