Well damn, who could have seen a “people familiar with the matter” story coming from the ECB?
We spent all of last week digi-shouting about how Steve Mnuchin had just fucked Mario Draghi (and also Kuroda) with the “weak dollar” rhetoric in Davos.
And Mario Draghi spent part of his post-meeting press conference on Thursday chastising Mnuchin for effectively short-circuiting the ECB’s efforts to normalize policy. I mean Draghi didn’t put it that way, but that’s what he meant.
The ECB was already facing a daunting communications challenge when it comes to trying to convey their intention to call an end to APP in September (as opposed to letting it run another three months through December after probably tapering it to €15 billion/month) against a backdrop of persistent euro strength, so they needed a currency war with Mnuchin about like they needed a hole in the head.
On Sunday, Klaas Knot decided to go ahead and come out guns blazin’ with a call to end QE “as soon as possible” which is probably not what he needed to say after last week.
Well sure enough, Bloomberg now says “ECB policy makers are sticking to the assumption that their bond-buying program will be wound down over about three months rather than brought to a sudden halt.” Again, that comes from “euro-area officials familiar with the matter.”
You can read the full story for yourself, but you’d be dense not to assume that the reason you’re seeing that story today has everything to do with what happened last week. It’s really not worth looking at the charts here because the knee-jerk reaction to the story has already been partially faded, but this was what happened as soon as it hit:
- GERMAN 10-YEAR BUND YIELD PARES INCREASE ON ECB TAPER INTENT
And you know what the funny thing is? That Bloomberg story literally hit just as we were finishing up a piece for Dealbreaker that predicted exactly this kind of gradual walking back of expectations that September would be the end.
“The ECB and the BoJ have seemingly been forced into a situation where the pace of normalization will have to slow if the U.S. pushes the envelope on a weaker dollar,” we wrote.
So yeah. I guess when it comes to raining on Mario’s parade, Mnuchin is the new Josephine Witt…
That won’t work. So why doesn’t ECB take the SNB approach? Financial alchemy. Print a trillion euros, swap into dollars (pushes down EURUSD) and buy US stocks. Maybe those are too overvalued already, so scratch that. Instead buy US houses, then move unemployed southern Europeans into them (as Trump wants white immigrants, not yellows or african shitholes) on secret condition they vote against trump. Solves about 4 problems with one plan.