Today has an anti-climactic feel to it. Yesterday’s leak of what is purported to be the ECB staff forecasts point to small downward revisions to inflation forecasts and an ever small upward tweak to growth. This would be in line with only mild changes in the forward guidance language.  

The clear indication is that inflation is still not the conditions of a self-sustaining path toward the target. What follows from that assessment is that it is premature to retreat from any of the unorthodox measures. The asset purchases run through the end of the year. The September ECB meeting is seen as a likely venue to announce the continuation of asset purchases beyond the end of the year albeit at a slower pace.  

Two economic data today support the eurozone growth story. Growth in Q1 was revised up to 0.6% from 0.5%. This lifts the year-over-year rate to 1.9% from 1.7%.It appears the revision was aided by capital investment. Household consumption was revised slightly lower, and government expenditures were unchanged.  

The prospects for Q2 look solid, given the PMI readings. Today Germany reported stronger than expected April industrial output figures, after disappointing orders data yesterday. Output rose 0.8% compared to the Bloomberg median estimate of 0.5%, and the March decline was revised to 0.1% from -0.4%.   

The point to bear in mind is that because of the output gap, growth alone is necessary but insufficient to change the ECB’s stance. Prices have to rise. Meanwhile, the euro remains near its recent highs. Buying yesterday’s pullback seems to point to the path of least resistance. There was a brief attempt yesterday to shake out the weak longs, but it failed as new buying emerged ahead of $1.12.

Former FBI Director Comey’s prepared remarks were released ahead of his testimony today. There is much attention drawn to today’s hearing, and it will be televised live. It may make for good theater, but it is unlikely to be the kind of thing that moves the capital markets. It seems widely recognized that Comey’s “revelations” may not be very flattering for the President, but they do not rise to the level of illegality. Keep in mind that this is one hearing of one of the two investigations being conducted by Congress, and the FBI is conducting its own investigation. These are early days.