One by one, everyone is not only realizing but admitting that if after 7 years of ZIRP, QE and currency warfare in general, nothing changes, then perhaps the 8th year (and 9th, and 10th) won't do much either. Here's Socgen:
Two months of QE for nothing. Well, not strictly true of course, for inflation expectations are up 30bp and Euro stocks are still up 15% since January even after investors withdrew $1.5bn last week. But look at the euro. EUR/USD yesterday returned over 1.1350, the highest level since the ECB announced QE on 22 January. The trade-weighted euro is up 3.4% from its April low. The Q1 GDP data were not bad, excellent in fact for Spain and France, but net exports are not contributing much. Perhaps this underlined the limitations of how a weaker currency, in the euro area at least, is no panacea because of the structural headwinds, and this does not offset the impact of the weak currency on the demand side. Former BoE governor King yesterday made a timely intervention, warning that central banks risk tipping the world into a currency war. We're there already, of course, but if $60bn per month of money printing by the ECB can't get the euro down (because of the USD), then what's next? The RBA has cut rates twice this year, and AUD/USD trades back over 0.8100. Is FX intervention next?
That, and every other form of "intervention" as well. Because the closer central banks are to losing all control, the more "intervention" there will be until the concept of a "market" disappears forever.
