MBS Day Ahead: Markets Focusing on ECB Despite Robust Data Calendar

The European Central Bank (ECB) announcement hits at 7:45am this morning and ECB President Draghi does the usual press conference at 830am.  With the announcement itself unlikely to break new ground,the focus should be on Draghi's handling of the QE topic.  In general, the consensus viewpoint on ECB QE is that it's likely to happen, but not just yet. 

The more Draghi does to indicate an objective plan for the TIMING and AMOUNT of stimulus, the more pleasantly surprised markets might be.  Yesterday's news of a potential Germany-specific stimulus package cast some doubt as to whether or not the ECB would need to be as aggressive at this meeting.

Beyond that, there are still plenty of other market-moving considerations--not the least of which being the ADP Employment data out at 8:15am.  This has a hit-and-miss relationship with the infinitely more important Nonfarm Payrolls data out tomorrow, but a big deviation from the forecast tends to be a reliable market mover.  The other big report of the day hits at 10am with ISM Non-Manufacturing.

All that said, domestic economic data has been one of the least relevant market movers recently.  Trading momentum has actually moved in the opposite direction of that suggested by the data on so many recent occasions that the normal correlation simply can't be counted on for now.  Whatever the case turns out to be, we can approach the day with the same lines in the sand as yesterday, thanks to afternoon rally that kept 10yr yields inside their trend channel.