Onto the ECB

The pivot towards economic data is in full swing as the Fed and market participants try to figure out how the trade war is affecting the real economy. The US dollar rebounded Wednesday but it was a rough ride. The ECB decision is next and the main question is whether any more dovishness from Draghi will keep the euro capped (more below). A new Index trade was issued yesterday for Premium susbcribers.

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The market's fresh focus on economic data was on full display Wednesday. The weakest ADP reading in nine-years sent USD/JPY to the lowest since early January but a solid ISM non-manufacturing survey 90 minutes later prompted a U-turn.

Even with the turn in data, the market isn't exactly sure what it wants. The bond market is entirely focused on the Fed and the front end of the Treasury curve rallied once again and yields touched new lows. Stock markets like the idea of rate cuts but hate the idea of weaker growth so that's a balancing act that can change day-to-day. The FX market is also caught in the middle.

USD/JPY and USD/CHF are straight-forward USD-negatives on bad news but other USD pair reactions depend on if US economic weakness is contained or another dynamic that will cause central banks elsewhere to ease. Generally, it's the latter but on tariff-specific news the dollar can suffer solo.

On that front, the first day of US-Mexico meetings ended without a deal as Lopez-Obrador's team asked for US help and funds to stem the flow of migrants, among other requests. Talks will continue and the come after Fitch downgraded Mexico and Moody's lowered its outlook.

Those headlines will be key late in the day but earlier the focus will be on Draghi's press conference. The market will be looking for TLTRO details and the possible introduction of a tiering system for deposit rates. Economic forecasts could also be trimmed but the reaction to that will depend on how Draghi frames it. Expect plenty of hand-wringing about global trade.