ECB technically ready for negative deposit rate if it decides to act

Good Morning,

- Euro trade slightly up at 1.31 level after yesterdays sell-off and ahead of US Payrolls data.

- Asian shares: Japan's Nikkei close, Hong Kong's Hang Seng +0.19 % (07:00 GMT), Korea's Kospi +0.43%, Australia's ASX 200 +0.03% and China's Shanghai +1.44%.

- Draghi: ECB technically ready for negative deposit rate if it decides to act.

- The ECB cut its key interest rate to a record low as the 17-nation euro region struggles to emerge from recession. Policy makers meeting in Bratislava yesterday lowered the main refinancing rate to 0.5 percent from 0.75 percent, a move predicted by 45 of 70 economists in a Bloomberg News survey. The ECB kept the deposit rate at zero and reduced the marginal lending rate to 1 percent from 1.5 percent to preserve a symmetrical rate corridor.

- ECB President Mario Draghi emphasized the decline in price pressures. Although unemployment is at record highs above 12%, Draghi argues that structural reforms are needed to address that; i.e, it is not an appropriate aim of monetary policy-unlike how the Federal Reserve sees things. Draghi indicated the discussions were underway about ABS (of non-financial businesses) collateral, which reveals the direct the ECB is moving regarding improving the access to credit for small and medium sized enterprises. Lastly Draghi also announced that the full allotment of liquidity will be remain at least until the middle of next year. This is a way to manage expectations and essentially commits the ECB to easy policy for the next year.

- Danish Central Bank cuts key Interest Rate To 0.2% from 0.3%.

- Italy reports a state sector budget deficit of €11 billion in April compared to €2.025 billion in April 2012. The deficit in March was also larger than expected, so it doesn’t look like a seasonal skew.

- The U.S. trade deficit fell more than expected in March as imports recorded their biggest drop since 2009, the latest sign of slowing domestic demand. The trade gap narrowed 11.0 percent to $38.8 billion - the second smallest since January 2010. February's shortfall on the trade balance was revised to $43.6 billion from the previously reported $43.0 billion.

- US jobless claims unexpectedly dropped last week to the lowest level in more than five years, indicating companies are retaining staff even as the economy cools.

- Stephen Poloz, the former head of Export Development Canada, has been named the new governor of the Bank of Canada, replacing Mark Carney, whose term ends June 1.

- China’s April Non-Manufacturing PMI falls to 54.5.

- Australian PSI: Services sector slips deeper into the red in April, was down 5.5 points to 44.1.

- Watch today: EU forecasts, US Employment & ISM Non-manuf.

Have a nice Weekend !

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