Talking Points:

Euro Falls as ECB’s Draghi and Coeure Talk Up Stimulus Expansion
Upbeat US Retail Sales Data May Boost Fed “Taper” Continuity Bets
US Dollar May Follow UST Yields Down as S&P 500 Futures Decline

The Euro came under pressure to start the trading week, hobbled by comments by ECB President Mario Draghi and Executive Board member Benoit Coeure. Draghi told the IMF spring gathering that the exchange rate “has become more and more important for price stability” in recent months, warning that keeping policy as accommodative as it is today given further appreciation would “require further monetary policy stimulus”. Coeure elaborated on this theme, saying an ECB asset-buying effort akin to QE might target mid- to longer-term maturities and hinting that completing the AQR was the likely prerequisite to action (as we have argued).

Later in the day, the spotlight turns to the US Retail Sales report. Receipts are expected to have grown 0.9 percent in March, marking the largest monthly increase since September 2012. A strong outcome may reboot confidence in the continuity of the Federal Reserve’s QE “tapering” cycle, offering a lift to the US Dollar. Sentiment trends may work against the greenback however. The benchmark currency fell alongside US 10-year Treasury yields last week as the stocks turned lower, feeding safe-haven demand for US government debt. S&P 500 futures are pointing firmly lower to start the trading week, warning more of the same may be ahead.

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