Euro was lifted yesterday but the lack of hints on QE extension from ECB president Mario Draghi. But the strength was brief as markets focus turned elsewhere. One development to note was the jump in US yields out of nowhere. 10 year yield closed up 0.075 to 1.616 and is heading back to upper side of recent range at 1.635. 30 year yield rose 0.086 to close at 2.323, also close to range resistance at 2.359. Fed fund futures are pricing in 21% chance of September Fed hike, up from prior day's 15%. Such developments, however, were not accompanied by strength in the Dollar as the dollar index struggled to stay above 95.0 handle. Hence, we're not convinced by buying in Dollar for the moment and the markets could trade without direction as the weekly close approaches.
ECB the left policy rates unchanged with the main refi rate, the interest rates on the marginal lending facility and the deposit facility staying at 0%, 0.25% and -0.40%, respectively. QE, the asset purchases program, also stayed at 80B euro per month until the end of March 2017, or beyond. We had expected ECB to extend the duration of the program and broaden the asset categories it would consider buying. President Mario Draghi kept the door open for further stimulus and suggested that the Governing Council has tasked the relevant committees to "evaluate the options that ensure a smooth implementation of our purchase program" and would "act by using all the instruments available within our mandate", if warranted. More in ECB Disappoints, Keeping Rates and QE Unchanged.
On the data front, Japan M2 rose 3.3% yoy in August. China CPI dropped to 1.3% yoy in August while PPI rose to -0.8% yoy. Australia home loans dropped -4.2% in July. Swiss unemployment, German trade balance and UK trade balance will be the main focus in European session. Canada will release job data and housing starts later in the day.