Draghi didn’t deliver bond buying, he delivered a five-figure euro discount in less than a day
From this time yesterday, the euro has given up five full cents in a swan dive from 1.1625 to as low as 1.1115. It’s bounced a cent in the last hour but that moves looks like a blip on the chart.
Deep down inside the ECB Governing Council knows the transmission mechanism isn’t lowering borrowing rates by an additional 10-20 basis points, it’s lowering the euro by 10-15%.
Talk about a global currency war started 5 years ago but with the ECB and BOJ moves in the past three months, and with the scope of the moves it suddenly feels much more real. In hindsight, it might have been because the US was winning the war with EUR/USD at 1.40 and USD/JPY below 80.
The yen symbol would be my choice of weapons for sure
Japan and the Eurozone have struck back. I’m sure there will be some hand-wringing in US corporate board rooms when the 2015/16 recovery falls flat because exporters lost market share and corporate profits evaporated when converted back to dollars.
Gold is taking a break at the moment but in non-dollar terms it’s surging and I think the gold bugs have as good of an argument as ever.
From a trading perspective, the ECB leaks were the big head fake. It’s frustrating because the crux of the massive easing program leaked out three times and it looked like the market didn’t want to go down.
The story is far from over. On Wednesday, Italian Prime Minister Matteo Renzi said “My dream is parity,” in EUR/USD in an interview with the WSJ. That’s what passes for a politician in 2015.
