Bunds may be buying (figuratively and literally) the notion that Mario Draghi was “dovish” on Thursday, but the euro certainly isn’t.
The single currency has largely held onto gains racked up as Draghi spoke at the post-policy-decision presser on Thursday…
…with EURUSD climbing above its 2016 high at 1.1616.
“EURUSD could climb toward two-year high set in Aug. 2015 after investors seem to ignore the dovish comments from ECB President Mario Draghi,” Georgette Boele, a currency strategist at ABN Amro Bank in Amsterdam said this morning, adding that “Thursday’s gains, in the face of remarks that should be negative for the currency, are a sign of underlying euro strength and signal further upside.”
Maybe.
Or maybe they’re a sign that the market simply doesn’t think Draghi can go much further with this in the face of technical constraints on PSPP and the possibility that his policies are helping to inflate asset bubbles around the globe. Don’t forget, one reason Sweden has a massive housing bubble is because the Riksbank has effectively been forced to follow the ECB down the accommodative policy rabbit hole – and that’s just one example of how monetary policy in one country invariably reverberates across the globe.
“Investors are starting to question the continued rhetoric from Draghi about being ultra-dovish,” Allianz’s Charlie Ripley, observed in the aftermath of this morning’s euro rally. “This scenario is going to put continued upward pressure on EURUSD.”
And you know what that means for European equities, right?
Remember this?…
