Just five weeks ago, EURUSD traded back to 'fair-value' with its comparable ECB and Fed balance sheets. Since 7/20, things have got a little hope-fueled and now the picture is quite different. Based on EURUSD at 1.25, this 'implies' a Fed/ECB ratio of around 1.05x - which in turn provides us with a nice round $400bn expectation for NEW QE in the short-term. Of course, if Draghi goes full retard then the Fed's 'counter' will have to be even higher, but we suspect (ever so subtley) that this afternoon's action (with high beta, QE-sensitive 'everything' selling off) hints at more than a few 'investors' getting cold feet.
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Chart: Bloomberg