Following yesterday's crash in the DAX, and historic surge in the Euro after an ECB announcement which many suggested was another central bank policy error, moments ago Mario Draghi did everything in his power to reverse said error, when in a speech in New York which concluded moments ago followed by a Q&A session [3], he effectively tripled down on his "whatever it takes" position (remember his double down took place in Malta at the end of October) and said that not only is "QE there to stay", but could be "calibrated" if needed and the ECB can use "further tools" if needed as there is "no limit" to the "size of the ECB's balance sheet."
- DRAGHI SEES NO SPECIFIC LIMIT TO ECB BALANCE-SHEET SIZE
- DRAGHI: CAN'T BE LIMIT TO HOW FAR ECB USES TOOLS WITHIN MANDATE
- DRAGHI: CHANGES TO QE PROGRAM ADD EU680B IN LIQUIDITY BY 2019
- ECB'S DRAGHI Q&A: ON MKT REACTION, PKGE PROPOSALS PUT FWD,APPROVED
- ECB DRAGHI: QE THERE TO STAY; IF NEEDED COULD BE RECALIBRATED
- ECB'S DRAGHI: CAN USE FURTHER TOOLS IF NEEDED TO MEET INFLA TARGET
- ECB'S DRAGHI: NOT REVOLUTION BUT RECALIBRATION;WAS RIGHT PKGE
- ECB'S DRAGHI: EURO FX NOT POLICY TARGET; AS VEHICLE IS IMPORNT
So he was only joking the last time he warned the market he would go full mad dove, but this time he is serious?
Rhetorical questions aside, he made it very clear that yesterday's ECB announcement was not meant to address market expectations:
- ECB DRAGHI: NOT PKGE TO ADDRESS MKT EXPECTATIONS
No: addressing market expectations is what today's speech was for, and as one can see, while it had a very modest impact on the EUR (for the reasons laid out yesterday [4]), which is supposedly what this is all about, it has sent the S&P soaring as market expectations of a European central bank that will do anything to support markets have been reset.
[5]
