The exaggerated response to last week's ECB meeting continues to unwind. Draghi's dovish comments and the strength of US employment data have helped keep the divergence meme front and center.  

The euro traded quietly in Asia before breaking down to almost $1.0800 in the European morning. There seemed to be only two news developments that had a bearing. First, the results of the first round of the French elections saw the National Front capitalize on the refugee and terrorism to lead in six of the twelve regions. This is largely what the polls had warned.In the peculiarities of the French system, this exaggerates the strength of the far-right. In the second round this weekend, the smaller parties drop out and in one-on-one contests, the National Front is likely to hold on to two regions, the projections show. This is still significant, but talk of a Le Pen presidency in 2017 seems wide of the mark. 

Second, German industrial output disappointed. The 0.2% increase in October compares with a consensus expectation for a 0.8% increase. German industrial output had fallen in three of the four months through September (when it posted a 1.1% decline). In the first ten months of the year, German industrial output has contracted in six months. 

However, the details were not as poor as the headline suggests. First, manufacturing output rose 0.7%, led by a 2.7% increase in investment goods output. This follows a 1.8% jump in October factory orders (and the Sept series was revised to show a fall of 0.7% rather than the 1.7% drop initially reported). The main drag on industrial output came from the energy sector, where output slumped 5.9%, the most in seven years. 

Despite the decline in the euro, growth in the eurozone in Q3 was largely driven by domestic demand.  This is what the Bundesbank reported before the weekend. It is also what should be confirmed in tomorrow's revision (and details) of Q3 GDP for the region as a whole.