In the immortal words of Draghi: “As they say in America, there is only one way to skin a cat”. Actually, Mario, the expression is that there is more than one way to skin a cat but hey, I’m not expert on skinning cats.
Did someone say ‘skin a cat’?
The euro jumped higher during Draghi’s press conference but a good portion of the move was due to Letta surviving a confidence vote in Italian parliament. The main takeaway from Draghi was cautious optimism about a recovery but continuing to leave all options on the table. Given the 90-pip move in EUR/USD you would think there were some hawkish headlines but there were none.
Draghi repeated that inflation risks are broadly balanced and said the ECB discussed an interest rate cut. He said they have a vast array of instruments we could use, exclude none including LTRO. He was asked about the euro and was very deliberate and diplomatic in his response but gave the impression he would like it to be lower. On growth he said it was proceeding inline with ECB baseline assumptions.
If I had seen only the headlines I would have never guessed EUR/USD would rally on these headlines. It was also clear that Letta was going to win yesterday. Technically the break is good news for EUR/USD but I don’t see any fresh fundamental reason to buy.
