So what did we learn from today’s lack of action from the ECB, and the lack of words to indicate that any further measures might be needed ?
Does it mean that’s the end of any easing talk, or do Draghi & Co still believe deep down that they seem to be getting away with it right now and may need to act still?
He talked clearly enough about maintaining an accommodative monetary policy and says they are ready/ won’t be afraid to act if necessary. I’d say that no change in rates and /or policy today and with generally improving data and inflation stabilizing, albeit at levels still to concern, really does lessen future chances.
Of course we are assuming a lot in that the present economic/geopolitical scenario remains, and we know that assumption can always come back to bite us up the ass, but it seems to this observer that if they didn’t do it today then they probably won’t at all.The 2016 HICP forecasts shown to them today will have made encouraging/comforting reading, not to mention bringing a big sigh of relief.
So where does that leave the ol’ teflon-coated/armour-plated vehicle that is the euro ? Draghi was at pains to repeat that the exchange rate is not a policy target but equally clear that it does have a significant influence on inflation. Inflation and unemployment remain the two most important issues to tackle but if no change of policy is seen to be required and these at least stabilize further then downside risk to the euro is greatly reduced. Draghi has been noticeably unwilling to talk the euro down lately by inference of word and that too has dented the will of the bears.
When all’s said and done it’s still a guessing game and a forever fickle one at that.
Tomorrow brings the NFPs and another load of unknowns. As I’ve said before ours ( mostly) is not to reason why. Ours is just to sell and buy.
I’m out of here and back to my early berth tomorrow. Thanks for all your great input today and I hope we’ve helped along the way.
