Fundamental and Political wrap: ECB confident but cautious

From a fundamental perspective, the ECB stole the show. As expected, the central bank held the refinancing rate unchanged at 0.00%, and purchases, maintaining its forward guidance. 

After a relatively dovish message in March, where the ECB surprised markets by signalling it was on track to end its stimulus program before the end of 2018, the risk to the Euro was that President Draghi would ratchet up his concerns over the outlook for the Eurozone economy. Indeed, Draghi acknowledged the growth slowdown, but he remains confident that inflation will reach target. This gave markets a mixed message and initially, the euro went bid before meeting strong supply at 1.2209 down to 1.2106 at the time of writing in late NY. The euro really got whacked when he said the euro area economy has broadly lost momentum across countries and sectors, with the declines sharp and in some cases unexpected. However, he managed to sugar coat the downturn with confidence that inflation was returning to target and with the following clarifications:

• Most variables that have slowed are above long-term averages;
• It's coming after a number of strong quarters of growth – some normalisation was expected;
• There appear to be some temporary factors: Easter, strikes, and weather.

Other key headlines: (source LiveSquawk)

• Moody's: expects 2-3 fed hikes over rest of 2018, followed by 3 hikes in 2019
• US senate confirms CIA director Mike Pompeo to be secretary of state
• WH economic advisor Kudlow: I have high hopes for China talks
• Barclays US Q1 GDP: 1.8pct (prev 1.5pct); Goldman: 2.2pct (prev 1.9pct)
• China's premier Li: open to negotiating with us on trade issues
• Fars news: Iran will not accept nuclear deal modified to please Trump
• EUs Barnier: repeats uk transition is not certain until a Brexit deal is reached
• Barnier: no special Brexit deal for financial services
• Italy's PD: important steps forwards in govt talks with 5-Star party