Today Draghi gave a strong hint that the ECB will unleash something at the June meeting. While several major banks have apparently been anticipating some monetary stimulus from the ECB, the way Draghi practically spelled it out for us today prompted the Euro to drop severely.
Please watch this video for the crucial few moments today:
Something I am quite struck by is the general lack of GOOD reason to place a trade, on the Euro, or any other major Futures product. Take a look at this chart for instance. Volume is nothing to write home about, day after day, until at last Draghi breaks the deadlock. I think this underlines how important it is to keep your powder dry for the really good opportunities instead of getting your hands dirty in the constant chop.
Garbage, Garbage, Garbage… and then finally some action.
The day many had been waiting for: ECB Statement.
Draghi sits down and begins his report, having already decided to make no changes to lending and deposit rates.
2 minutes in, and 6E has rallied a good 30 points… but tentatively. My view is it may have in part been due to shorts unwinding their bets that Draghi had some hint of something up his sleeve.
This is a special blog post in that the video is a full hour long, containing several major markets as they gyrate, alongside live audio from Draghi’s statement and Q&A session.
Personally I didn’t see any obvious trades to make. Yes, the Euro moved up, and later moved down, but I prefer the trades that are smacking you in the face: “The ECB … admits defeat… Mario is tired… I retire”. That sort of news.
For the quick-firing trader there was money to be made today, on the back of ECB banker comments.
In the early afternoon (12:50 UK Time), ECB’s Makuch claimed members of the ECB board are prepared to take decisive steps if needed and one of the possibilities is adding liquidity.
6E behaved nervously and this was a sign of things to come… Harry Hindsight News Impact: 4/10
The Big Dog Draghi was scheduled to speak at the Sciences Po Conference in Paris, and at 16:15 UK Time he re-iterated that the ECB stands ready to take additional monetary measures.
Nothing new right? Well 6E took a considerable dive and it didn’t require a high speed supercomputer to get in on the action either.
On a Harry Hindsight Impact Scale, I’d call this a 6!
And finally a bit of house-keeping to the 3 most noteworthy scheduled data releases of the session:
09:00 AM London Time saw the release of German IFO Business Climate – 110.7 vs Expectations of 110.9
To my surprise, the EUR moved a fair bit, albeit so quickly perhaps the best trade there was to fade it? Harry Hindsight News Impact: 3/10
09:30 AM London Time came and with it the release of UK CPI at 1.7% vs Expectations of 1.7%
Despite coming in bang in-line, 6B similarly put in a notable move, although no easy money in my opinion to be had. Harry Hindsight News Impact: 2/10
14:00 London Time saw US Consumer Confidence hitting 82.3, a good bit above the Expected figure of 78.5
The market (ES) response was muted, and the failure to rally was perhaps a reliable signal that the next move was to the downside. Several points were lost over the next half-hour. Harry Hindsight News Impact: 1.5/10