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Sploshing across the Rubicon

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  • Mr Draghi has continued to bravely splosh his way across the monetary policy Rubicon moving further into the territory of negative rates with more ECB rate cuts yesterday. This was signalled as the last rate cut, in an attempt to induce banks to borrow from the TLTRO program.
  • There was also ECB balance sheet expansion via asset purchase programs, which is not an open ended quantitative policy commitment. The announced measures are helpful for larger Euro area companies, but without banking intermediation they are of limited use to smaller companies.
  • US labour market data offers a "compare and contrast" study to the Euro area. We are looking for a consensus 230,000 non-farm payrolls figure, while pointing out the upside risk in the wake of a week of stronger data. Unemployment is seen dropping to 6.1%.
  • Some positive noises are emerging around the Russo-Ukrainian talks to bring about a settlement in Eastern Ukraine, although markets have not been reacting too significantly to geopolitical risks