Talk 'em up, then slam 'em down.
The familiar pattern of "clear and transparent" central bank communication was on full display moments ago, when following months of build up to an ECB taper announcement, the ECB used its favorite mouthpiece, Reuters, to "trial balloon" that an ECB decision over whether to announce a firm end-date to the central bank's bond buying could be "put off until December" as a result of disagreement among the ECB council stemming from "concern over Euro strength" which is leading to "uncertainty and divide within the council."
As a result, some within the ECB want to be able to "extend or expand" buys if needed, in other words if the EURUSD rises too far above 1.20.
The highlights from Reuters:
- CONCERN OVER EURO STRENGTH IS LEADING TO UNCERTAINTY AND DIVIDE WITHIN ECB COUNCIL - SOURCES
- ECB POLICYMAKERS DISAGREE ON WHETHER TO SET FIRM END-DATE FOR BOND-BUYING PROGRAMME IN OCT - SOURCES
- SOME ECB RATE SETTERS WANT TO BE ABLE TO EXTEND OR EXPAND BUYS IF NEEDED - SOURCES
- SOME ELEMENTS OF ECB DECISION COULD BE PUT OFF UNTIL DEC - SOURCES
And the full report:
European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters. A stubbornly strong euro, with its dampening effect on inflation, is driving a rift among ECB policymakers, the sources on the ECB’s Governing Council with direct knowledge of its thinking said.
The split is between ‘hawks’ -- led by richer, northern countries such as Germany -- who are ready to wind down the 2.3 trillion euros bond-purchase programme and ‘doves’ who simply want to reduce its monthly pace, the sources said.
This is raising the likelihood that they will seek a compromise solution on Oct. 26, whereby any end-date for purchases would not be set in stone, or that they will put off part of the decision until December, the sources added.
The main point of contention is the euro’s continued appreciation against major currencies, which is threatening to curb inflation in the euro zone by making its imports cheaper and exports dearer
In immediate kneejerk reaction, the EURUSD tumbled from 1.1990 to as low as 1.1960 as traders scratch their heads just how will the ECB extend QE indefinitely when it is running out of bonds to buy, and wondering if the ECB will pull a BOJ and buy ETFs next as Reuters also "trial ballooned" back in 2016.