The ECB decision is due at 1245 GMT (7:45 am ET)
It's the final countdown ahead of the ECB decision. Draghi only has himself to blame for all the hype after he stoked the fires in November.
Three final thoughts:
Mario "Return of the Jedi" or Draghi "The Phantom Menace"? h/t @victorleonardib
1. QE
Supply might be a problem. If there's a surprise I think it will be that they don't deliver enough QE. There are only so many bonds to buy in Europe and leaks suggesting they're looking at local/regional bonds as well as bank loans show there might not be enough.
Ryan had a great idea for a trade noting that the QE announcement will come after the rate decision.
2. Deposit rate
They could cut the deposit rate more sharply. When the ECB cut it to -0.20% they thought that was the floor. A cut to -0.75% in Switzerland showed there was plenty of space to cut more. The market is looking for around 15 basis points more but they could counteract disappointing QE with a 30 bps cut. They've floated the idea of a two-tier system based on the size of deposits so they don't hurt their banking overlords at Deutsche Bank and BNP Paribas.
3. It's crowded
Positioning is dead-against the euro. I think it's gotten out of hand. Draghi has over-delivered so many times that the true market expectation is that he will do it again. When Goldman is virtually promising 300 pips, that's a scary sign.
Even if he delivers 15 billion more in QE for another six months and a 15 bps deposit rate cut, I think the market will end up disappointed, perhaps after a knee-jerk move lower in the euro.
What's the trade?
I think the expectations are way too high. It's like buying Apple shares on earnings after they beat 10 quarters in a row and with the CEO saying it's going to be a blockbuster report. I could see the euro busting stops below the March low of 1.0463 so I don't like buying ahead of the announcement but with a gun to my head, that's what I'd be doing.
