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Time for a reality check

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  • The ECB disappointed on the detail of its new policy, mainly but not giving too many details of its new policy. Mr Draghi did reveal enough to make it appear that the ECB (an unelected, supranational body) is trying to dictate fiscal policy to Greece. It is almost as if the ECB thinks it is the IMF.
  • Markets were not happy with the lack of detail – investors do tend to dislike uncertainty. As the policy was likely to have limited real economic impact the lack of detail is likely to have limited real economic impact, but market volatility is potentially more troubling (it impacts Euro banks).
  • The US has the employment report, after a week in which a small move in the ISM manufacturing sentiment index from fantasy levels to slightly less fantastic levels caused growth concerns amongst investors.
  • We see a strong employment report, with 250,000 non-farm payrolls and another drop in the unemployment rate. There is a case to be made for the US having a divided labour market with little mobility between the two sectors, which would imply simultaneous tight and loose conditions.