Thursday was of course all about Mario Draghi, who tried and succeeded to put a decidedly dovish spin on the announcement that ECB QE will be tapered further to €15 billion/month in September and will end in December. The date-based rates guidance (no hikes until at least summer 2019) was decidedly euro bearish. There’s a full recap here, but the bottom line is this:
Here’s Goldman’s take:
These announcements came earlier that we (and others) expected – in June rather than July – yet the content is relatively close to our long-held view of the monetary policy outlook: asset purchases will cease at end-December and the first rate hike is likely to come only in the second half of 2019, for example at the October meeting (our forecast, which we leave unchanged following today’s announcements). We read the ECB’s enhancement of its rate forward guidance as dovish relative to market expectations, since it implies policy rate increases at the June or July meetings in 2019 are unlikely. In response to today’s announcements, the market has priced out rate hikes in either June or July next year and the EUR depreciated around 1¼% vis-à-vis USD.
Biggest drop for the euro against the dollar since Brexit:
Obviously, this was bullish for European equities:
The news was of course also bullish for European bonds:
The Nasdaq was the standout stateside, hitting a new record high.
It’s crowded in there:
Seven-month high for the dollar which surged as the euro plunged.
The stronger dollar didn’t do anything to help EM currencies, with the JPMorgan Emerging Market FX Index falling to November 2016 lows.
More intervention failed (again) to stem declines in the real. BRL breached 3.80 today despite the BCB offering a record $5 billion in FX swaps. They look like they’re losing control of this again after seizing the moment last Friday following the Thursday plunge towards 4.00 USD:
The bottom fell out for the Brazil ETF as the BRL’s losses started piling up this afternoon. Here’s a two-day look that captures the Fed:
The Turkish lira continued to decline and kinda looks like it’s ready to make another run to all-time lows after weakening well past last week’s pre-rate hike levels. Here’s some perspective:
The dovish ECB did help the lira gain against the euro, but you get the point here. The hawkish Fed and ongoing worries about Erdogan and the decidedly poor fundamental backdrop are going to continue to weigh.
I TRY (get it?) not to say “I told you so”, but recall this from my assessment of last Thursday’s hike:
I don’t know how long it’s going to take for everyone to come to terms with the fact that exactly none of this is done without Erdogan’s consent and that that consent is predicated not on concerns for CBT credibility, but rather out of concern for political expediency, but what I do know with absolute certainty is that as soon as he feels like the run on the lira is over, things will go right back to the way they were and he’ll go right back to shrieking about lower rates in public speeches.
And then there was this tweet from that same morning:
— Walter White (@heisenbergrpt) June 7, 2018
The Argentine peso was crushed. And I mean fucking crushed, falling more than 6% with traders citing a BCRA that was M.I.A. As a reminder, the central bank held the line at 25 ahead of the IMF deal, but now that the deal is struck, their interventions are more sporadic. Expect them to be back over the next couple of sessions. Bid-asks were wide and some of the turmoil was attributed to this “URRRRRRRGENTE” tweet from Marcelo Bonelli, who Bloomberg describes as “a well-known Argentine reporter”:
I’m not about to try and chase that shit down, but suffice to say the situation with the peso is similarly “URRRRRRRGENTE!”:
One other notable: South Korean stocks had their second worst day on Thursday since the March 23 bloodbath:
Oh, and Ethereum got lucky when the SEC decided not to subject it to federal securities regulations. After “soaring” 11% on Thursday, it’s “only” down 63% from the highs:
The SEC decision could pave the way for Ether futures, according to Cboe President Chris Concannon.
“We are pleased with the SEC’s decision to provide clarity with respect to current Ether transactions.,” he said in a statement. “This announcement clears a key stumbling block for Ether futures, the case for which we’ve been considering since we launched the first Bitcoin futures in December 2017.”
Of course that could be bad news too. Just ask Tom Lee, who is now blaming Bitcoin’s recent stumbles on futures. Don’t worry Tom, just another $119,000 to go and we’ll hit that BTC target you set in January.
Also, Steve Bannon is bullish – so there’s a contrarian indicator for the crypto crowd.
Finally, for your moment of zen, here is White House Press Secretary and woman who is on her way out the door, Sarah Huckabee Sanders trying to hang on until she can escape this nightmare …
"Come on Sarah, you're a parent. Don't you have any empathy for what these people are going through?" CNN political analyst Brian Karem presses White House press secretary Sarah Sanders on family separations at the US-Mexico border https://t.co/b6r513WU0R pic.twitter.com/FqdjUK4Jhe
— CNN (@CNN) June 14, 2018