The man in the white hat? Why that’s Mario Draghi.
He implied in a London speech that the ECB could restart its bond buying program to support “monetary policy transmission” which has been disrupted by the sovereign debt crisis.
Spanish bond yields have plunged on the remarks, down 38 bp to close to 7% from nearly 7.65% earlier this week.
EUR/USD has broken its nearly month-long downtrend, in place since shortly after the EU summit at the end of last month.
Why the sharp reaction to Draghi’s comments? Because the ECB is the only European institution with a shred of market credibility left. Full stop.
Moral of the story: Fade politicians, go with the ECB, at least in the short-term.
