ECB Coming but China in the Spotlight

The US dollar was generally stronger on Monday as the ECB decision nears but trading was thinned by a US holiday. The euro was the top performer on the day while the Swiss franc lagged. A drop in Chinese stock markets to start the week sharpened the focus ahead of GDP numbers later.

Leaks surrounding ECB sovereign QE continued on Monday as Hollande said QE is coming this week. He later backtracked but and said it was only a hypothesis but it was most-interesting to note that the market didn't react to either of his comments. 

A separate report hinted at a fight behind the scenes with the Bundesbank trying to limit and delay QE and that might have helped the euro claw back as high as 1.1640 to erase most of the post-SNB losses.

Overall, the lack of kneejerk moves on ECB headlines suggests a program is fully priced in and it will be the details that move the market. The size of the program (+/- 500B euros), the collectivisation of risks and the ability of Germany to remain on the sidelines will be the focus.

Before the ECB, however, China is in the spotlight with Q4 GDP data due along with industrial production and retails sales (all at 0200 GMT). The consensus is for 7.2% y/y growth but there is plenty of market chatter about a 7.0% reading so the market may be braced. If it breaks the 7% barrier, however, it could stoke jitters that may only be placated if the PBOC takes steps.

On Monday, Chinese stocks tumbled a whopping 7.7%. That cut into a more-than 50% rally since September and leaves the market in negative territory for the month. What's interesting is how well the Australian dollar held up. That kind of resilience bodes well.