Market Update - 3 May 2013

• Highlight yesterday was of course ECB’s rate cut decision and as expected ECB cut 25bps in the midst of a deteriorating economy. EURUSD took a dip after that but to be honest most of it has already been priced in before the announcement.

• USDMYR opened just a touch lower, but still hovering around 3.0500, currently trading at 3.0450. The big day is finally here this Sunday and we are seeing a lot of last minute push. Expecting a quiet trading day today for USDMYR as most players are opting to sit this one out as the uncertainty on the outcome is high.

• This is the main gist of Draghi’s speech: “First, based on our regular economic and monetary analyses, we decided to lower the interest rate on the main refinancing operations of the Eurosystem by 25 basis points to 0.50% and the rate on the marginal lending facility by 50 basis points to 1.00%. The rate on the deposit facility will remain unchanged at 0.00%.”

• US jobless claims Lowest In Five Years. Initial jobless claims dropped 18K in the latest week to the lowest level since January 19, 2008. This was lower than consensus and our CS 340K forecast.

• The ECB made three key policy announcements this month, which are listed below.

1. On policy rates, the refi rate was cut by 25bp to 0.50%, a new record low and the first cut in ten months. The marginal lending rate was cut by 50bp to 1.00%, bringing the width of the policy corridor to an even 50bp either side of the refi rate.
2. Regarding liquidity provision, the commitment to maintain fixed rate full allotment at refinancing operations "for as long as needed" was restated. It was also announced that this procedure would remain in place at least until mid-2014.
3. Regarding measures to boost credit flows to businesses, the Governing Council has decided to start consultations with other European institutions (the EIB and the European Commission) on initiatives to promote a functioning market for asset-backed securities collateralised by loans to non-financial corporations.