Clearly, the euro and in particular bunds didn’t get what they were expecting in the ECB decision (out as usual at 7:45 EST).
It seems readily apparent that some folks were looking for a tweak in the language around the QE assessment.
When they didn’t get it, the reaction in the single currency was perceptible, but the read through in bunds was obvious, and equally obvious was the bounce in yields that accompanied Draghi’s opening remarks at the presser:
Here’s the euro, and again, the reaction to the policy statement was muted, but the move higher around the opening remarks is, well, remarkable:
That’s pretty clearly a reaction to these statements:
- DRAGHI: CORE INFLATION TO RISE GRADUALLY OVER MEDIUM TERM
- DRAGHI: HEADLINE INFLATION DAMPENED BY ENERGY PRICES
- DOWNSIDE RISK TO OUTLOOK MAINLY DUE TO GLOBAL FACTORS
See why that matters? He’s just saying the same thing he said in Sintra, only not as explicitly.
And then there was this, which, while notable, is something everybody already knew:
- DRAGHI: COUNCIL WILL TAKE DECISION IN AUTUMN
The message is this: inflation weakness is transitory and I’m looking for excuses to look through it.
Oh, but don’t worry because:
- DRAGHI SAYS TIGHTER FINANCING CONDITIONS `LAST THING’ ECB WANTS
- DRAGHI SAYS ECB TO STAY IN MARKET ‘FOR REALLY LONG TIME’
“Mr. Draghi’s test balloon he sent to the Portuguese sky last month was effective, so back to ‘whatever it takes’ for the time being. Now it’s all about credibility of their inflation outlook,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany, offered a few minutes ago. “September will be in focus now, and let’s be honest, markets’ patience shouldn’t be tested too often.”
Meanwhile, bunds are having second (and third, and fourth) thoughts: