Rates as of 0500 GMT

Market Recap

Oops! Yesterday I said that the Eurozone GDP usually isnt revised or if it is, its only by 10 bps, so it doesnt matter although I did say that with the recent gyrations in GDP there have been some larger differences. Well, yesterday was one of those days when there was a larger difference growth turned out to be double what they had thought initially! That set off a round of speculation that the European Central Bank ECB might signal a 50 bps hike was on the cards sometime in the future see below.

I dont think so. I still expect that ECB President Lagarde will continue to signal a gradual increase in rates, i.e. 25 bps, and that the market disappointment is likely to depress the euro afterward. But what do I know? She hasnt told me whats likely to happen. Nor have ECB Chief Economist Philip Lane and I gone out for a drink together and chatted about the markets in a long time. Ever, in fact. So this is just my view.

Elsewhere, it was noticeable that both JPY and CHF weakened despite the fall in stock markets.

For JPY the decline was probably due to Bank of Japan Gov. Kurodas consistent support for his ultraloose monetary policy. Speaking at an FT Global Boardroom conference, Gov. Kuroda repeated that the recent rise in prices in Japan was driven by energy costs and would not be sustained. At this moment, Bank of Japan must continue its support for economic activity by continuing with the current monetary easing, he said. Gov. Kuroda…