ECB Leaves Interest Rates Unchanged, But Broad Bond-Buying Initiative Anticipated

06:34AM Sep 06, 2012
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What Traders are Talking About:

* ECB leaves rates unchanged. The European Central Bank (ECB) left its key interest rate unchanged at 0.75% following its monthly policy-setting meeting. While not a major surprise, some were anticipating a 25-basis point cut. Much more focus is on ECB President Mario Draghi's post-meeting briefing later this morning at which he is widely expected to unveil a broad bond-buying initiative that is aimed at boosting economic activity throughout the euro-zone.

The long and short of it: The euro strengthened and the U.S. dollar index softened slightly following the ECB rate announcement. But the real market reaction will come following Draghi's anticipated announcement of further economic stimulus.

* FC Stone revises corn, soybean estimates. Brokerage firm INTL FC Stone cut its corn crop estimate to 10.607 billion bu. (121.4 bu. per acre yield) from 11.043 billion bu. (124.3 bu. yield) in August. The firm raised its soybean crop estimate to 2.739 billion bu. (36.7 bu. yield) from 2.730 billion bu. (36.2 bu. yield) last month. INTL FC Stone based its crop forecasts on a survey of its customers and other factors. Informa Economics is expected to release updated crop estimates tomorrow morning.

The long and short of it: The bigger soybean crop estimate is a shocker and runs counter to what other private estimates are expecting.

* Lots of focus on Black Sea grain export policies. On Wednesday, Ukraine's government and exporters agreed to limit 2012-13 grain exports to 19.4 MMT -- 12.4 MMT of corn, 4 MMT of wheat and 3 MMT of barley. But the exportable supply of wheat is likely to be exhausted by November, prompting some traders to believe the country will soon announce wheat export restrictions for 2013. Meanwhile, Russian officials continue to signal there's no need for grain export restrictions. Despite drought-reduced crops, Russian officials say they will have enough grain to meet domestic and export needs.

The long and short of it: Whether or not export restrictions are enacted may be a moot point as exportable supplies are expected to be exhausted relatively quickly in both Russia and Ukraine, meaning neither is likely to be a major player in the world export market the second half of 2012-13.


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