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Euro Surges As Mario Draghi Scuttles Negative Rate Rumor
Yesterday when a "source" released a rumor about a possible -0.1% European deposite rate, we had a quick assessment.
30-60 minutes until ECB sources denies everything
— zerohedge (@zerohedge) November 20, 2013
We were a little off on the timing, but once again spot on in principle, and moments ago Mario Draghi just said that negative rates were discussed in the last policy meeting and there was no news since then, that a rate cut has raised "some concers" and that certainly one should not infer negative rates. In other words, just like in May speculation is one thing, enactment of NIRP - something totally different. And just like that our other assessment of yesterday's "leak" was also confirmed:
This is what is called a "rumor-based" market test
— zerohedge (@zerohedge) November 20, 2013
And so now the ECB knows that the most it can get out of the EUR on a NIRP rumor is about 100-150 pips.
Finally, as we observed in "An ECB Negative Deposit Rate? Don't Hold Your Breath, Says Citi", this is just what Citi also warned. Some of Draghi's other comments:
- DRAGHI SAYS DON'T TRY TO INFER NEGATIVE DEPOSIT RATES
- DRAGHI SAYS HE IS AWARE RATE CUT HAS RAISED SOME CONCERNS
- DRAGHI SAYS ONE CONCERN IS EFFECT OF RATE CUT ON SOME COUNTRIES
- RATE CUT WAS AMID SUSTAINED DOWNWARD DRIFT IN INFLATION
- DRAGHI SAYS GRADUAL DISINFLATION HAS BEEN BROAD BASED
- DRAGHI: EURO AREA MAY HAVE PROLONGED PERIOD OF LOW INFLATION
- DRAGHI: RATE CUT WASN'T BECAUSE ECB SEES DEFLATION RISK
As expected, the EUR pairs surge. Which means we are back to using the "ECB does QE" rumor as the default "forward daily guidance" on the EURUSD and EURJPY closing price.
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Draghi mumbled some crap and something happened.
Turn in tomorrow......maybe there will be a press conference.
Don't make me patent that thing.
the expected denial shortly after the world records it is called the central bank shuffle. It's also complete and utter disrespect on display against the public for clearly they believe everyone is so stupid they just take hook, line & sinker everything they spew out. Disgusting.
Germany will NEVER allow the ECB to print, so Draghi has to be more creative in the face of The Fed and Japan actions. It's a war by any other name.
the air is getting thin in the think tanks...
Zoom out FFS!!
Over.
How come gold does not gap up?
Cause when you got a heart of tungstun, the gold price can't rise to the top.
Since sanity and all fundamentls abandoned the gold market, only one force remains. Gravity. It only ever goes down.
"Market". Lol
0.01% a 'surge' not!
Good analysis Tyler. The onset of the taper drama highlighted what CBs have always done- tested market sentiment for their ideas.
When fraud is the game, possession is the rule!