The Art of Market Management by M Draghi
Another masterclass in central bank market management by his nibs. He's told us that all the possible "very negative" risks and scenarios they were worried about, the risks they lined up tool after tool after tool to fight, have mostly not materialised and others may not too, at least to the extent they were fearful of.
That doesn't change the nature of the current monetary policy stance but it removes a big chunk of why policy is as accommodating as it is.
Is that hawkish? Not really but it is yet another sign that the ECB is accomplishing what it set out to do, and that was to stop the rot. It's more of a bean counter move from the risky pile to the not-so-risky pile, than an indication that they're going to start tightening. As noted in the statements, it's a removal of language with the possibility of more to come.
He says the economic recovery is starting to gain more traction, it's "broadening across the sectors and countries", another pat on the back for monetary policy.
The masterclass is that he has once again managed to keep good news from derailing the ECB's intentions on keeping the euro down. It's still surprising me that the market is buying his crap, and not making him pay but who am I to argue. I just trade it as I see it and hope the market allows me to stay in the game long enough to profit from it.
Slowly but surely though, the reasons why the ECB is coming closer to end of the easing road are growing, and at some point Draghi will really have to recognise that or the market will do it for him.
For the euro, there's probably enough here for the hawks to dine on for a while but assess the moves we're seeing in context, we've not really gone anywhere. The big event is still going to be the FOMC next week (with a sprinkling of Dutch elections) and the only way the euro is likely to see any significant downside is if the Fed is super hawkish next week along side their hike.
Draghi struggles to find the risks.
