Propeller heads will be focused on the operational details of how and when the ECB will deploy its EUR 60 bln in covered bond purchases when the ECB announces the details of that operation on Thursday.
I, on the other hand, will be on the lookout for one word: brutal. Trichet has used it twice to describe currency moves. Once to great effect in November 2004 and again in November 2007 with less significant results. The Fed was in the early days of an aggressive easing cycle in fall 2007, and today it is at the end of such a cycle, so perhaps deploying the “b” word would pay significant returns for the ECB president this time around.
The strong EUR just adds to the deflationary forces in Europe and complicates any recovery. I think there is a significant risk that Trichet tries to talk down the Euro come Thursday.
One of the big US investment banks was seen hedging his bets (or a clients bets) today, buying a half-yard of 1.38 EUR/USD buts expiring a week from today, after the ECB meeting is past.
