European Central Bank Announces Easing Extension

To the grand confusion of market participants, the European Central Bank opted to announce two new items during its latest monetary policy decision.  While interest rates were left on hold, the Central Bank decided to extend the asset purchase program past the original March expiration until December of 2017.  However, the December date is not firm, with the ECB hinting that the program could be extended further should conditions necessitate.  Accompanying the extension was the announcement that €80 billion in monthly purchases would be tapered to €60 billion in April.  Should the program fail to accomplish its objective of raising inflation, the Central Bank indicated that adjustments could be made in terms of the size of the program or its duration.  The volatility that came from the decision and subsequent press conference was immense, with EURUSD falling as much as 275 pips from intraday highs before closing above 1.0600.

The ongoing challenges facing global trade conditions has continued to impact the German economy as evidenced by the latest import and export figures.  Exports remain in contractionary territory on an annualized basis, falling -4.10% through the 12-months ended in October.  Imports fared better, falling only by -2.20% over the same period.  On a monthly basis, both imports and exports rose moderately, with imports outpacing the gains in exports and causing the trade surplus to fall to the lowest point since January.  According to Destatis, one of the predominant drivers of the weakness was actually trade within the European Union and Euro Area peers.  This particular attribute proved to be a big component behind the steep annualized drop in trade.  Before the data, the German DAX 30 was on a tear higher, rallying to the highest point since November of 2015 before pulling back slightly on the news.