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Latvia is poised to become the 18th member of the eurozone at midnight tonight, following the path of other former Soviet satellite states, Estonia and Slovakia.
Given Latvia's recovery from a major debt crisis a few years back, and the still fairly terrible state of Greece, Portugal, Spain, Portugal and Cyprus, one might be tempted to ask, what on earth are they thinking?
European Central Bank President Mario Draghi sees "no immediate need" to cut the bank's main interest rate further.
While the eurozone crisis "isn't over," Draghi told Der Spiegel, "there are many encouraging signs." These include economic recovery in some countries, lower trade imbalances and falling budget deficits.
Draghi's comments come after the ECB reduced rates by a quarter of a point to a record low of 0.25% last month and cautioned that the eurozone could face a "prolonged period" of low inflation. However, Draghi said in the interview that there are no signs of deflation. "We don't have a situation as in Japan," he said.
Bundesbank President Jens Weidmann has said that the "calm" in the financial markets could be deceiving. "Subdued price pressure shouldn't be a license for arbitrary monetary-policy easing," Weidmann said.
The Istanbul National 100 Index is off nearly another 5% as Prime Minster Erdogan's cabinet shuffle - in which he replaced half of his team with arch-loyalists - has failed to halt the opposition. TUR -7.7% premarket.
The weakening lira looks to be giving the euro (FXE) a bid across the board; it's ahead 1.1% vs. the greenback to $1.3842 - the highest level in more than 2 years. European stocks overall are doing fine, the Stoxx 50 up 1%.
The German Gfk consumer confidence index has risen to 7.6 heading into January from 7.4 previously and topped consensus that was also 7.4.
"The mood among consumers in Germany is again remarkably good as 2013 draws to a close," says Gfk. "Further increases were recorded in economic expectations and willingness to buy. (However,) income expectations declined slightly from a high level."
The strengthening of the consumer outlook adds to increasing bullishness among German investors and businesses. (PR)
However, deflationary pressures exist, with PPI dropping an expected 0.1% on month in November vs -0.2% in October. On year, PPI -0.8% vs -0.7%.
Eurozone flash manufacturing PMI has increased to a 31-month high of 52.7 in December from 51.6 in November and topped consensus of 51.9.
However, services slipped to 51 from 51.2 and missed consensus of 51.5.
Composite output increased to 52.1 from 51.7 and edged forecasts of 51.9.
Manufacturing output climbed to 54.8 from 53.1.
PMI increased after two successive months of decline, but the upturn is uneven. Manufacturing growth strengthened while services slowed, and Germany powered ahead, while France, in the words of Markit, "looks increasingly like the new "sick man of Europe."
The data indicates that GDP grew 0.2% in Q4, "suggesting the recovery remains both weak and fragile," says Markit.
"Tapering is in the price already; we find it difficult to see where the dollar strength would come from," says Goldman's Tom Stolper, leaning against the crowd by taking a bearish view on the greenback (UUP +0.1%) for 2014.
He sees the dollar falling to $1.40 against the euro (FXE -0.2%) - no big deal given it's at $1.3724 at the moment - but it's a large deviation from the Bloomberg contributor consensus of a strengthening all the way to $1.28. Of 46 surveyed by Bloomberg, 42 expect the greenback to gain vs. the euro next year.
"We expect all major central banks on hold until at least 2015 - hence no immediate catalyst" for the dollar to strengthen further, says Stolper.
Exchange rates are a matter of common concern, but they are not a target of monetary policy, says Mario Draghi at his press conference following the ECB policy meeting today (no change). The goal, he says, is price stability.
On negative interest rates, Draghi says the topic was brought up, but only got a "brief" discussion.
The borderline hawkish comments are enough to send the euro higher by about 75 pips, now +0.25% on the session and buying $1.3632. FXE +0.3% remarket.
The Chinese yuan has passed the euro to become the second-most used currency in global trade finance, the Society for Worldwide Interbank Financial Telecommunication (Swift) says.
The renminbi took an 8.66% share of letters of credit and collections in October vs 6.64% for the euro.
The yuan's rise has been rapid, with its share in January 2012 just 1.89%.
The trend indicates that China's attempts to internationalize the currency, such as loosening forex controls, have been successful. The government intends to take more steps as part of a major economic reform plan.