Hit by profit-taking ahead of the weekend, despite US jobs data that remove the last hurdle to another Fed hike this week, the greenback remains on the defensive. It has softened against all the major currencies and many of the emerging market currencies.The chief exception is those in eastern and central Europe.  

Turkey and Dutch tensions rose over the weekend as the Dutch refused to the leftTurkey’s foreign minister to enter the country to campaign, took another minister to the border, earning the wrath of Turkey’s Erdogan. The Dutch go to polls Wednesday. The Rutte government is credited with handling the affair well, and although supporters for the Freedom Party, may have become more enthusiastic, the PVV does not appear to be growing its base. Overall, the market impact looks minor. 

What will be the busiest week of the quarter, if not year, has begun off slowly. The main economy news was the Italian industrial output figures. They disappointed, and follow the poor French figures are the end of last week (-0.3% instead of the expected 0.5% gain).Italian output fell 2.3% in January after a 1.4% gain in December. The median estimate in the Bloomberg survey was for a 0.8% decline.  

Last week’s ECB meeting gave investors the clear impression that the central bank recognizes that the downside risks have lessened in the region. No more rate cuts are anticipated, and greater attention is being given to the eventual exit from the unorthodox monetary policy. The sequencing of the exit between asset purchases and negative interest rates may take a different form than the exit by the Fed or the earlier exit by the BOE.  

Still, we can’t help but wonder who leaked news that there was a discussion along these lines (reduced negative deposit rate before asset purchases are complete) and to what end. It seems those who are critical of the ECB’s course may have had the incentive to provide that information to the media.Of course, it is reasonable to expect a push back.It came from Belgium’s central banker Smets, who recognize the macro improvement, was clear that no decisions were taken.