Euro Surges On Expectations Of ECB Rate Hike

Tyler Durden's picture

Here is how one offsets the aftereffects of concerns there may be a liquidity crisis in Europe: just make a few completely impossible statements about hiking interest rates and presto: your currency is back to unchanged. The EURUSD has surged by 60 pips in seconds following reports that the ECB's Bini Smaghi was quoted as saying that ECB may raise rates as price pressures mount. While it is great that more central planners are finally acknowledging inflation does exist (cotton is now firmly planted over $2), the probability of this happening is zero to negative, as it would put pressure on the short end, flatten the curve and otherwise pull the rug out from the ponzi "recovery" that has taken foothold in Europe, forcing even more involvement from the Fed to keep the European domino from going down. Elsewhere, Bund futures tumbled as the inflation genie is one step closer to being released from the bottle...

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ZeroPower's picture

50pips. Still waiting on the intraday 200bp swings

Cursive's picture


....which would have been unthinkable for the FX markets 4 long years ago....

TooBearish's picture

Inflationary expectations are contained - B-52 Bernank

bigelkhorn's picture

just like Q2, and Q3 and Q4 ....I am sure they are coming. and why not? this collapse of the US economy is going to plan perfectly. 

I mean if the sheeple wake up, then they will know what is coming. But by then it will probably be too late. 

There are so many people saying the market will crash this week. and you know whta that means....she blows in the opposite direction. If more stop covered get triggered today and next week, there is a strong chance we will see higher prices on the S&P 500. Technically it looks bullish.

sabra1's picture

what about the people saying the market will go higher? the opposite will happen! it goes both ways, doesn't it? huh?

slackrabbit's picture

acutally it does...and it doesn't.


Sorry ...I had an Obama moment;-)

plocequ1's picture

Problem solved. Now wait for the POMO, Buy some Amzn or Apple and leave me alone

bingaling's picture

Doesn't anybody else besides zerohedge realize that rates cannot go up? Seriously ,who in their right mind believes this shit anymore?

Ivanovich's picture

bots dont reason.  they just react based on syntax.

plocequ1's picture

Reality check. Rates will not go up. No charts or links needed and thats that,

EscapeKey's picture

Not a single issue has been resolved, but yet the markets move time and time again on empty rhetoric.

Cdad's picture

L. Blankfein and company at work....getting to their Euro/USD way or another.


taraxias's picture

Bingo, that's all it is about. Markets don't move, THEY in complete coordination move markets to create the illusion of reality.

We're way beyond FUBAR at this point.

Caviar Emptor's picture

Like that moment of enlightenment scene in The Matrix:

Spoon boy: Do not try and analyze the market. That's impossible. Instead... only try to realize the truth. 
Neo: What truth? 
Spoon boy: There is no market. 
Neo: There is no market? 
Spoon boy: Then you'll see, that it is not the market that moves, it is only The Bernank

tmosley's picture

That is excellent.  Well done.

Terminus C's picture

This made me laugh and cry at the same time.  Humorous and deeply sad.

blackbox's picture

I thought the banksters has 'resolved' to pay themselves part of their bonuses in equities? For that to work they have to pump pump pump the equities.

jobs1234's picture

And right on cue Bernanke is out defending QE and ZIRP against all the critics.

Its like the more people complain, the more stubborn he becomes.

Oh regional Indian's picture

Boy, those Euro death times from last year seem so last year.

So when is the Fedgang going to raise rates?

Even a quarter %? Right now, even a quarter percent looks like a mountain the Dollar will not be able to survive.

qussl3's picture

So the one banker that cares about inflation leaves the ECB, then they start jawboning about hikes?


Fucking BS.

TooBearish's picture

Yea ben raise up kill what little is left in the housing market - its all good




lbrecken's picture

bubble is abou tto go pop as this will seal deal on QE3

HoofHearted's picture

"excellent...just as we had planned" -B.S. Bernanke

jobs1234's picture

I cant believe Bernanke's defense of QE2 at G-20. Why dont one of these ministers get up and punch him? 

Its so tiring to hear about his speil on emerging market demand and "normal" capital flows. Cotton up 50% in less than 2 months is normal. Did every Chinese person decide to buy Hanes this month?

sabra1's picture

so fantastic, no elastic, 25 cents a pair!

snowball777's picture

" the mills have scrambled to buy futures contracts to fix the prices of physical supplies before Friday..."

"are in large part because soaring demand from China, poor cotton crops in Pakistan and export restrictions in India that have led to acute supply shortages."

Supply shock.

EscapeKey's picture

I don't think anyone denies certain commodities are in tight supply compared to last year, but so were some commodities last year relative to the year before.

But the general trend through ALL commodities is up, up, up. That's not all down to tightness, or "political instability", or whatever this weeks favourite excuse is.

For the record - The Russian wheat harvest is down 12% y-o-y. Russia accounts for about 8% of global supply, which means we've seen a 1% global reduction (assuming static supply for the remaining world). If the world REALLY is in a such tight spot, that a 1% reduction in supply leads to a near doubling in price, then I would frankly expect to see wild price swings almost every year.

snowball777's picture

It's a combo...the panic buying is, no doubt, enabled by the liquidity firehose.

It's telling that these ramps have occurred before the harvests elsewhere are even complete.


Robslob's picture

The sooner the housing market is destroyed the sooner we can recover...unfortunately the market will NEVER AGAIN be allowed to define true price of an asset...or until Banks have enough capital to buy ALL the assets at deflationary prices.

The new sign of wealth...I own my car?



benbushiii's picture

This is the most absurd remark and reaction from a Central Banker to the inflation that is incipient across all asset classes.  If the world wants to get a handle on inflation they should be sterlizing and mopping up excess dollars, not playing along with the Bernank and allowing the dollar to get weaker.  How does Europe expect to compete on a global basis?

qussl3's picture

You'd think the CBs have a clue.

Waittt, or is this just one of those "strategies" they intend to use to "punish" speculators?

EscapeKey's picture

Don't confuse feigned with real incompetence. I refuse to believe the CBs don't know what's really going on.

In my profession, if I'm systemically wrong, I will be fired. But CBs always trout out the same defense; "no-one could have seen it coming", and they get away with it, scot free.

qussl3's picture

Exactly, if anything this piece of BS is meant to whipsaw the FX markets, if they meant to contract money supply they'd stop the BS backstops, rates have little to no effect on the move to inflation hedges.

SpeakerFTD's picture

Agreed.  Their only concern is the preservation of their member banks' balance sheets.  If hyperinflation is required to bring asset value back above par, then so be it.

All the rest is just hype for public consumption.  They are about as accountable to your concerns as you are to the ant you crush, unnoticed, as you go about your daily business.

Caviar Emptor's picture

Don't confuse feigned with real incompetence

Yup. It's the international brotherhood of bankers at work. They have to pretend they're not the autocracy that they've evolved in to. Or else that would spook the public and risk waking up the spirit of revolt

jus_lite_reading's picture

Another day, same old shit.

The ECB is forced to buy Portuguese bonds today as the rates have once again headed towards reality (8% for the 10yr). The EU is so insolvent it is beyond comprehension.

Germany has quietly benefitted from the PIIGS crisis and THAT is their real reason for "supporting" the PIIGS. They know, eventually, the PIIGS will have to be killed off but for now as long as this house of cards holds together, they are building up their workforce- only 7% unemployment and despite rising social tensions, their economy is improving while the PIIGS deteriorate.

Lord Peter Pipsqueak's picture

Similarly the debate about whether the Bank of England should raise rates is just as meaningless.Mervyn King is beginning to sound more deranged than out of touch by repeatedly saying the rise in inflation is "temporary" when anyone with an IQ bigger than their shoe size can see that inflation is here to stay and the price increases are accelerating.

Just like the Bank of Englands response at the time to the housing bubble the "oooh will they-won't they?" debate is being repeated again and is as pathetic as it is meaningless since the current Bank of England rate is just 0.5% and they are arguing about maybe putting it up 0.25% in June and then another 0.25% at the end of the year. So where does that leave rates then? Wow at 1%.

So when by the governments own fiddled figures inflation is over 5% that would still make interest rates negative 4%!!! If you look at the real world, inflation in the UK is probably around 10-15% so interest rates are nowhere near they need to be.Of course all ZH'ers know that if central banks were to put up rates where they should be,the whole western banking system would collapse.The UK is particularly vulnerable due to its massively overborrowed housing market, hence Kings reluctance to even put up rates by half a percent.

bania's picture

I love the concept of "zero to negative" probability of raising rates.  It's like ECB would raise rates but in a parallel, bizarro universe.

Dollar Bill Hiccup's picture

Modern financial warfare in all of its glory. The only problem is thinking of it in terms of nation states which is apparently no longer applicable.

Cdad's picture

This one is truly rich, Euro up causing the inverse reaction in gold/silver futures down.  Right.  You are telling me that this market will now try to reward that macro pair European ponzonomics are peaking?  My guess is this latest manipulation will have the lifespan of a Mayfly.

The criminal syndicate known as Wall Street fighting for its options expirations.  Central Bank Planners simply out of ideas...revert to entirely laughable rumors and finger pointing. I'm sure unemployed Americans all across the land suddenly have confidence.

Good grief [and by that I mean that the whole thing is so transparent now that market credibility is clearly face down on The Street].


SpeakerFTD's picture

I'm sure unemployed Americans all across the land suddenly have confidence.

I would like to see one Congressman or media talking head ask Bernanke to explain this.  According to his models, this should be impossible.

SheepDog-One's picture

Reduced to rumors and finger pointing! The World Financial Systems are now on the level of grade school playground during recess.

USD Long's picture

Is this the equivalent of "gunning stops" on a global level by Central Baksters...

Sueco's picture

Classic ECB... proposing raising rates the same day they announce buying Portuguese debt... 

Caviar Emptor's picture

Look, someone "in the front office' had to make a gesture to acknowledge that there's inflation. Yesterday made that necessary (CPI, Philly Fed in addition to Bahrain). 

Bernank couldn't make the statement or the whole apple cart would have been turned over in front of a 3 day weekend. So they decided to let ECB do some jawboning. 

That's in the re-flation playbook and why there's asset correlation to the EUR

Ferg .'s picture

This is farcical and a perfect example of how bi-polar markets can be . Statements such as these are bandied about by officials almost everyday . Sometimes the market reacts , sometimes it doesn't move an inch .

So regarding the euro , we had a poor Spanish debt auction , renewed talk of an imminent Portuguese bailout combined with a rise in yields and the comical revelation that Irish banks are now engaging in micro quantitative easing and yet , not only is the Euro relatively stable across the board , it's actually rising against many currencies . That's " efficient markets " for you .

The inflation rate in the EMU  isn't any way as pronounced as that of the UK , which has been above the BOE target for months and months and months . And yet no matter how many letters Mervyn King writes to Parliament explaining why rates remain unchanged and inflation well above 2% , speculators persist in keeping the GBP buoyant , attempting to frontrun BOE meetings which never produce a damn thing .  

Orly's picture

Okay.  That's it.  I'm out.

See you boys and girls in the summer when we can play on a more level playing field.

Until then, bountiful trading to you...

and watch your ass.