What Will Mario Draghi Say Today: Thoughts Ahead Of The ECB Announcement

Tyler Durden's picture

Unlike December 3 of last year, when there so much hope just ahead of the ECB's statement and Mario Draghi's press conference, which was all soundly crushed when the European central bank disappointed everyone leading to the biggest surge in the EUR since the announcement of QE1, this time few if anyone harbor any hopes about an upside surprise from not so super Mario.

To be sure, there is little in terms of expectations when reading DB's morning note today, where we find that economists "expect neither a change in policy nor a clear signal of further easing." DB does think that the Council will highlight its capacity to act, the ‘open-ended’ nature of its policies and the flexibility around the asset purchase programme. It concludes that "the ECB will be reactive in addressing the risks to its inflation mandate and will wait for more visibility on the three key fronts."

In other words, nothing, which of course may be just the "reverse psychology" moment Draghi needs to actually surprise markets: if his massive build up was so disappointing last month, why not do the reverse today?

But perhaps an even more important question for Draghi is not how he will manipulate markets higher, but how he will explain the relentless hockeystick in ECB inflation expectations which are based on $52 oil in 2016... or double the current price. One thing is certain: European inflation expectations are crashing with every passing day.

Another preview of the ECB comes from Fasanara Capital which writes the following:

ECB rhetoric likely to focus on collapsing inflation expectations (pictured below), now close to levels where QE1 ECB got announced in Jan 2015. With Oil lower than expected by the ECB for 2016, and oil forward un-anchoring and moving below 50$ (chart below), an higher inflation for the year due to base effects is also harder to see. Rhetoric can include anticipation of deeply negative interest rates and upsized QE, for future meetings.

 

Little expectations seems to be built into the ECB meeting, so rhetoric can somehow manage to kick-off a relief rally.

Purely tactically, after ECB press conf, we may look at fading such rally, potentially depending on entry points, via a combination of:

  1. Short DAX or FTSEMib
  2. Short BTPs, hedged
  3. Long EURJPY

If Saudis de-pegged, which looks like a real possibility now, oil could take a decisive leg down, and trigger turmoil, however short lived that may be. Today, Oil is weak, but not to a point where it may spoil the ECB moves.

Chart: Eur 5y5y Inflation Forwards

 

Chart: Brent Crude Spot, Brent Crude 2020 Forwards


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Father Thyme's picture
Father Thyme (not verified) Jan 21, 2016 7:28 AM

Nothing to see here!

Future Jim's picture

It's oil's fault.

It has nothing to do with cronyism, regulation, taxes, fiat currency, ZIRP, QE, government debt, misallocation of capital ... or conspiracy.

philipat's picture

It's China's fault. But anyway, I'm going to buy anything that isn't nailed down?

Perhaps when the CB's own every damn thing, bought with digital fantasy money, they will just quietly disappear and allow everything to collapse?

VinceFostersGhost's picture

 

 

Josephine Witt will be giving the rebuttal speech shortly after....you probably know her better as Eurogirl.

 

http://static.guim.co.uk/sys-images/Guardian/Pix/pictures/2015/4/16/1429182869866/b9155f08-9b1d-4b88-81d4-48ce0be5c2ed-2060x1236.jpeg

Future Jim's picture

and it's definitely not the fault of centralization, experts, or collectivism. It's the people's fault. What is Wrong With the People?

Early Retirement's picture
Early Retirement (not verified) Future Jim Jan 21, 2016 7:34 AM

Right- a "stimulus" of only the rich, where the velocity of money hit zero, has nothing to do with it.

stocktivity's picture

All these pig central banks have already shot most of their bullets.

NoDebt's picture

I'm guessing he's going to take a pass on "We're in deep shit" as his opening line.

 

Gmpx's picture

Mario should say nothing. This will be his best speech.

Theta_Burn's picture

Its all Linda Green's fault..

Did they ever find her and send her to prison?

philipat's picture

I don't know how to break this to you gently, but Linds didn't actually exist. But she has recently advertsied a nice collection of bridges for sale...

Ghordius's picture

"But perhaps an even more important question for Draghi is not how he will manipulate markets higher, but how he will explain the relentless hockeystick in ECB inflation expectations which are based on $52 oil in 2016... or double the current price. One thing is certain: European inflation expectations are crashing with every passing day. "

terrible, eh? the USD stronger as ever, and eurozone inflation expectations going down because... energy is included in the eurozone CPI calculation

terrible, terrible /S

whatever Draghi says, "markets" (and how I hate this label applied to the junior analysts of the megabanks and mega-hedgefunds) will not be happy

then he would have to promise moar in the tune of doubling or tripling down the whole already gigantic Q€ in order to make them happy, or change the direction of the stock markets

here, my usual comment: the ECB's business is not centered on the stock markets. sovereign bonds are the first, second and third reason for the ECB to act or not, after...

.... price stabeeeeeleeeeeteeee, bitchez. (I've spent a sizable part of this morning writing a loooong rant against Soros' globalism. here, if you are interested)

philipat's picture

With you on Soros. Evil cunt.

Regarding the "Markets", remeber that 70%+ of "Market" trading is by the CB/BIS/ESF complex and the TBTF's so, essentially, they ARE the "Markets". I thought you Eurocrats were in favor of Central Planning?

philipat's picture

Ghordi,

I hope you enjoy this one over your morning espresso and croissant:

 

https://www.youtube.com/watch?v=XmxXPSl3JDo

Ghordius's picture

+1, and a big smile. he is my favourite little British... weasel. And I agree with him on Churchill's take: not with the UK in it

the rest is all tied to his understandable frustration: he is a MEP... instead of an MP. he wants a British referendum, after all. and Cameron has not even set a date, yet

philipat's picture

Cameron is scared shitless (His "Minders" in The City are apoplectic) and will not set a date until he is forced to. The recent, shall we say, refugee incidents within Shengen borders, have perhaps focused the minds of British voters, possibly German voters also, in what might be described as an "Unhelpful" direction? I'm sure Soros, a man you love, is pouring Billions into the "In" campaign in support of the Oligarchs NWO Agenda. Get with the program Ghordi...

jmcadg's picture

He'll get his referendum, that's for sure. But what annoys me here in the UK is how this is all framed.

No perameters have been set on what the vote is truly about.

And the media constantly wheels out pro Europeans, but the very few anti EU campaigners are shown, and when they are it's as extremists, cranks and the disparate.

Even Farage is derided in this country as a buffoon. Yet on the Euro stage he speaks sense time and time again.

All I can see is pro Euro rhetoric, which will continue until about 3 weeks before a vote, then a poll will come out showing, actually, most Brits don't want to be part of Europe!

They will then put together a massive disinformation campaign (re the Scottish vote) to scare people into voting yes.

PS. I am not anti European, but I am anti this bullshit unelected establishment and their One World crusade.

philipat's picture

Does that really surprise you? The UK media (Especially the BBC, after what I suspect was a new forced mandate to obey after the last funding crisis), like the US MSM is, essentially, an Oligarch propoganda tool. WIth the vast majority of the UK population, like that in the US, unable to see any further forward than Facebook on a Smartphone screen, it is only the alternative media that presents any real information. Which is, I assume, why you are here?

The EU immigration crisis is impossible to keep hidden from the ignorant masses and is why the "Out" campaign MUST resort to the lowest common denominator approach to this issue. After all, that's politics?

Ghordius's picture

that's the Soviets. I mean, that what the Soviets were for. if we really have something that even remotely resembles a common european market understanding, then it's OrdoLiberalism

I mean, we opened our national market to each other, inside the EU. that's something quite opposite to (national) central planning, isn't it?

the EU as such could be attacked for being a classic liberal construct, inside, and a possibly protectionistic construct versus the outside of it

but socialist? that's the sovereign countries that are members of the club that can be somewhat accused of that, not the EU org

there is no such thing as an EU pension, an EU minimum wage, an EU fiscal transfer to the poor (also because there is no EU tax base), in short, I fail to detect even one "typical socialist" institution in the EU org itself, nor any "central planning" in the typical sense that isn't also explainable as a conservative/protectionistic measure versus trading partners, or typical classical liberal lobbyism

philipat's picture

That's so 20th century, Ghordi. The 21st century definition of Central Planning is as defined by that pinacle of freedom and capitalism; The United States. The EU may have only opened its markets to each other but it also opened its borders to anyone? A policy also similar to, and encouraged by, our friends across the pond in the interests of the Oligarchs and the NWO.

And, I'm sorry that the wet dreams of the Eurocrats about tax bases, armies, pensions, minimum wages etc. are now never going to happen. So sorry about that.

XXL66's picture

Gold is rock solid stable, fuck Draghi.

buzzsaw99's picture

here's a visual: draghi and yellen doing it. :vomits:

Ghordius's picture

why should he? he has EuroGirls literally jumping on his table, hasn't he? cute, young and... fiscal conservative girls making cute protests against him

I'll keep the visual of EuroGirl's visible part of her underwear as a shield against your vision, if you don't mind

buzzsaw99's picture

those frighten him. he prefers hobbit poontang.

gmak's picture

As soon as the headlines read "Draghi says", the Algos will pop the market, hoping to get the lemming muppets caught up in the wake. It won't last. Once volume stats to die, big money selling will continue and overwhelm the small buy side to push prices back down.

He's run out of bonds to buy. Starting to get pretty thin in the ECB QE garbage dump.

Kefeer's picture

As soon as the Saudi's depeg; that will send the stock and bond markets into absolute turmoil.   Since they have nothing to loose and have had high-level talks and agreements with the Chinese and Russians recently; the writing is on the wall.  Our lives are about to change forever.

philipat's picture

More important is the Saudis imminent agreement to allow China to pay for oil in CNY. It's the right time for China to force the issue, with Xi in the ME and Iran about to open up the pumps??

Kefeer's picture

I believe that agreement has already been reached between with Saudi's, Chinese, and Russians; they will be setting the price for most commodities notably oil and PM's.  That one announcement may very well be the catalyst that sends the world into total chaos and accelerate the reset.

philipat's picture

Yes, it would be the final nail in the coffin of the PetroDollar....

And Russia's decison to price ALL energy exports in RUB will do the same AND strengthen the RUB, hence the US final attack on RUB in recent months. But futile...

Winston Churchill's picture

Time to piss or get off the pot for the Saudi royals.They talk a lot, but do little.

FreeShitter's picture

Correct...intial algos pop and then dead air below.

kev the bev's picture

He`ll say "we did not disscuss gold"

agstacks's picture

"We talked about buying everything but gold"

<crowd chuckles nervously>

Ouagadoudou's picture

Energy high yield default rate versus Saoudi deficit. The only chart. But nobody  really knows when it gets messy

jubber's picture

well the ECB have been busy today 10 BTP back to 1:57 to save Italy and all the others have been swiftly bought up as well