Everything was moving along smoothly in the broad markets yesterday until Mario Draghi admitted during the ECB’s press conference that the possibility exist to technically deal with negative deposit rates. The EUR did not exactly fall off of a cliff upon the comment, but it did decline swiftly. The Single Currency was maintaining its higher realms after the ECB announced that they had lowered their key interest, but upon Mr. Draghi’s remarks trading in the EUR became volatile for a short duration.
The Single Currency is now maintaining a fairly stable range after recovering from the ECB press conference. Interestingly after the ECB lowered the interest rate, which shows that the European economy is struggling, Mario Draghi pulled out his frequently held refrain that he expects the E.U. economy to rebound sometime in 2013. But how does that exactly correlate with the acknowledgement that some European banking institutions could consider a negative deposit rate and the ECB could technically handle that scenario?
There is also another thought that must be raised, it is quite possible that President Draghi made his comments about negative deposit rates in order to weaken the EUR a bit without fundamentally having to inject any formal QE into the actual markets like his counterparts at the Fed, the BoE, and BoJ. Meaning that the confidence game that the central banks are playing remains intricate and full of absurdities.
Gold is near 1473.00 USD as of this writing, mirroring the broad markets as investors await the U.S. to enter today’s sphere with its important reports. Crude Oil along with the other commodities have been wavering in known ranges.
The U.S. will release its Non-Farm Employment Change numbers today and this data will certainly bring about a rather cautious trading environment until the report is published. An estimate of 146K jobs added is the forecast. The disappointing results from the ADP statistics on Wednesday and yesterday’s weekly Unemployment Claims which actually was slightly better than expected will have many investors sitting on the fence until they can be reassured that their outlooks for the U.S. economy has been correlated.
One indicator that will be discussed widely will be the Official Unemployment Rate which now stands at 7.6%, but is being widely disputed because it doesn’t accurately account for the unemployed who have stopped looking for work and have been jobless so long that they are not factored into the equation anymore.
The U.S. government is trying its best to create an atmosphere of stability and paint a silver lining for all on the horizon. But it is still proving a tough sell to Americans who see the same U.S. government unable to come up with a budget, soaring national debt, and a Federal Reserve that is trying everything in its bag of tricks in order to try to keep the dogs at bay.
It must be noted that besides the jobless numbers in the States today that the ISM Non-Manufacturing PMI marks and Factory Orders data will be released too. Wall Street turned in another positive day of trading on Thursday fulfilling the task of ‘another good day’ on the calendar. However, like an old nursery rhyme many investors continue to wonder if and when the clock will strike twelve and the bull rally that is largely perceived as a house of cards will fall down.