Euro Plunges To 1.16 Handle After Draghi 'Dovishly' Signals End Of QE

Update: Draghi is not pulling this back from the edge as is typically the case during his presser.

Instead of offering a more bullish 'flip-side' perspective - as is usually his manner in the presser - Draghi is piling on, confirming investors' concerns and the market's dovish interpretation.

  • *DRAGHI: DON'T WANT TO UNDERPLAY EXISTING RISKS TO OUTLOOK

  • *DRAGHI: UNDERLYING STRENGTH OF ECONOMY NOT CHANGED

  • *DRAGHI: SOFT PATCH MAY LAST LONGER THAN IMPLIED IN FORECASTS

  • *DRAGHI: SOFT PATCH CAN EXTEND INTO 2Q IN SOME COUNTRIES

All of which fits with this ugliness!

Danske Bank's Piet Christensen sums it up:

EURUSD just plunged to a 1.16 handle...

And 10Y Bund yields are down 8bps from the intraday highs

Is Draghi's sudden change of heart and style a shift to jawboning down the Euro? Certainly seems that way.

And while specs have lightened up on their record long EUR positioning, they are still extremely long...

*  *  *

Well, that wasn't supposed to happen...

Following the ECB's statement confirming further tapering of its QE program and and end to net buying by December, Bund yields and the Euro briefly spiked higher... however, just as we noted in the preview " That said, when everyone is confident that one thing will happen, don't be surprised to see the EUR tumble..." it appears the positioning is backfiring and investors are selling the news in Euro...

and buying it in Bunds...

 

Commerzbank strategist Thu Lan Nguyen warns the ECB decision "means there is little appreciation potential for the euro over the short to medium term," and expected EURUSD to drop to 1.16 in the next couple of months “as the dollar remains underpinned by a stronger rate outlook."

The ECB strengthening its forward guidance on interest rates “should contain any significant euro strength” going forward:

“What matters for the currency is when rates will rise in the euro zone, and the ECB has now made clear that there will be no step until at least autumn next year."

Citi agrees with Commerz, noting that what is dovish is how the ECB has pushed back the timing of the first hike to “at least through the summer of 2019”. Given that the changes to forward guidance and tapering were already expected by the market, there is little here for the hawks. Price action is playing out that disappointment. Given the levels EURUSD was trading prior to the decision (around 1.1825), this correction likely has legs. EURUSD is now approaching support at 1.1725, and then the June 1 low is in sight at 1.1617.

Of course, the machines in 'Murica could not resist using this 'event' as an excuse to ignite some momo...

Comments

NidStyles DownWithYogaPants Thu, 06/14/2018 - 09:21 Permalink

Wimpy is actually Lucifer, and runs everything on the surface.

 

Welcome to reality. He’s the only reason we aren’t in the first stages of the next world war.

 

parts of that may not be true, but I am not going to say which

 

Also, my predictive skills are getting better 

In reply to by DownWithYogaPants

NidStyles Uchtdorf Thu, 06/14/2018 - 10:40 Permalink

We will be right where we are supposed to be then.

 

 

 

 

Assuage, because I know you’ll read this eventually. 

Nope, the head gasket was not blown on that engine, there was zero oil left in it, and the bearings were rattling around like steel balls in a can. I know because I drove the damn thing when we had it on the flatbed. I actually drove it onto the flatbed. Drove it around the storage unit like that as well.

edit: Yep, just got the confirmation that I was correct. You fucking liar. Telling everyone that the it was just a blown headgasket. People talk dick. Everyone knows who did it, and everyone already knows the bastard was out of the country that same week.

In reply to by Uchtdorf

Son of Captain Nemo Thu, 06/14/2018 - 08:04 Permalink

No worries... Dragh-man will reverse that decision by the end of the day to make sure the "algos" go green again...

Same strategy we've been witnessing playing itself out over... and over... and over... again with every Fed Chairman since Henry Paulson and the "bank robbers" turned the balance sheets completely RED with unlimited printing since 2008!!!

Because once they stop?... It's "feeding time" for the destitute that he set up and "screwed"!!!

taketheredpill Thu, 06/14/2018 - 08:26 Permalink

EUR falls because ECB will keep rates lower longer than expected.

 

Bund Yields fall because without ECB stimulus Equities have less support so expect profit taking from stocks into Bonds.

 

Every US QE program had the same pattern.

 

QE Begins:  Bond Yields rise, Equities Rally

 

QE ENDS:  Bond Yields fall, Equities Drop / Stall out

 

Note Rally in US Long Bonds as Fungible QE Ends

 

To Hell In A H… Thu, 06/14/2018 - 09:08 Permalink

This is the Rothschild run FOREX having a laugh. The Central Banks and their western investment banking buddies are the international markets. They provide the line of credit and they work in tandem artificially setting the market. The entire markets are rigged and fixed.

Dilluminati Thu, 06/14/2018 - 09:09 Permalink

too many debts chasing too few Euros = debt deflation

and lets put aside the NPL's held by the European banks

and lets put aside the spectacular failure of Brexit

and lets put aside the looming debacle of Tommy Robinson 

and lets put aside the referendum on immigration in Europe

but now is the time to evaluate what and where you want to be positioned as the market transitions

To everything (turn, turn, turn)
There is a season (turn, turn, turn)
And a time to every purpose, under heaven

A time to be born, a time to die
A time to plant, a time to reap
A time to kill, a time to heal
A time to laugh, a time to weep

To everything (turn, turn, turn)
There is a season (turn, turn, turn)
And a time to every purpose, under heaven

A time to build up, a time to break down
A time to dance, a time to mourn
A time to cast away stones, a time to gather stones together

To everything (turn, turn, turn)
There is a season (turn, turn, turn)
And a time to every purpose, under heaven

A time of love, a time of hate
A time of war, a time of peace
A time you may embrace, a time to refrain from embracing

To everything (turn, turn, turn)
There is a season (turn, turn, turn)
And a time to every purpose, under heaven

A time to gain, a time to lose
A time to rend, a time to sew
A time for love, a time for hate
A time for peace, I swear it's not too late

P.K.Snosage Thu, 06/14/2018 - 09:10 Permalink

"With the dollar failing to benefit from yesterday's surprisingly hawkish Fed meeting, traders are confident that the only alternative is for the Euro to surge this morning after the ECB announcement."

 

(Zerohedge)

Let it Go Thu, 06/14/2018 - 09:27 Permalink

Nothing seems capable of moving Europe in the direction of implementing long-needed EU and eurozone reforms.

Until the EU is prepared to do “whatever is necessary,” to paraphrase ECB chief Mario Draghi, in order to protect retail bank depositors, the EU will remain far from being a united political economy. More on this subject in the article below.

 http://EU Banks Remain Massive Problem.html

Econogeek Thu, 06/14/2018 - 10:11 Permalink

Clearly the Europeans are quite annoyed at Trump about the G-7. 

This looks like retaliation -- Trump does tariffs, so we'll let the Euro slide.  Win-win for Merkel right now.