Right, so when you think about Draghi’s remarks at Jackson Hole, don’t forget how the context has morphed over the past couple of weeks.
After WSJ tipped Draghi’s speech back in July, the assumption was he’d take the opportunity to telegraph something about the wind down of QE and that was of course all kinds of bullish for the euro.
Apparently dissatisfied with the setup, the ECB subsequently threw cold water on things with a leak to Reuters, who earlier this month reported that Draghi would not in fact say anything about policy but would instead stick to the theme of the symposium (how generous of him).
Well then, once the ECB minutes revealed that the governing council is concerned about an “FX overshoot,” the conversation went from “will Draghi say something about an exit plan that will cause the euro to soar” to “will Draghi try and jawbone it lower.”
So that’s the setup for the comments excerpted below and you’ve got to think that no matter what he says, Draghi wasn’t exactly excited when FX markets decided that Yellen was dovish (even though she really wasn’t anything because she didn’t talk about policy), thus driving the dollar and Treasury yields lower. Because that catalyzed a rally in the euro:
So in the absence of an explicit reason to sell, EURUSD could head higher…
And without further ado, highlights from Darghi’s remarks via Bloomberg
- DRAGHI SAYS POLICIES MUST AIM AT ANSWERING BACKLASH
- DRAGHI SAYS THE GLOBAL RECOVERY IS FIRMING UP
- DRAGHI: EUROPE RECOVERY CONSOLIDATION AT EARLIER STAGE THAN US
- DRAGHI RETURN TOWARD PROTECTIONISM WOULD BE A SERIOUS RISK
The knee-jerk is indeed a spike. As far as I can tell from the speech embedded below, there’s no mention of the euro…
If we close through 1.19, it will be the first time since early 2015.