Currency Craziness

This is going to be a fun one (sarc.) to unravel...

Remember just a few weeks ago the ECB stunned the world with a 25 basis point rate cut when consensus was for no action? The Euro tumbled a couple hundred pips almost instantly and apparently the ECB engaged in what most of the rest of the world is doing, debasing their currencies to make their economies/exports more competitive (and other reasons). However the rate cut didn't hold the Euro down for long, who knows why, perhaps because it has been the main carry driver of the market, maybe something more fundamental, but the point of the rate cut has come unravelled as the Euro has lifted since then.

This morning from the WSJ:

ECB's Praet: All Options on Table

Central Bank Could Adopt Negative Deposit Rate, Asset Purchases If Needed

"Asset Purchases are otherwise known as Quantitative Easing" which is illegal in numerous EU charters, or at least the US version of outright Bond Buying.

So the ECB hinted at QE, the Euro did this...

 As with the $USD on QE, the Euro initially sank-not good for the EUR/JPY, but who even knows what that means now.

The EUR/JPY did this. Note the initial move in the Euro and this pair was down, then back up, however look at the correlation with ES/SPX Futures below.

Almost exactly the opposite of the correlation over the last year+ 

The ECB must respect its legal constraints, Mr. Praet said, however its rules "do not exclude that you intervene in the markets outright."

However as anyone following the numerous bailouts knows...

The ECB's charter forbids it from financing governments.

That's a slippery legel slope, but since when are Central B's contained by the law, wink to Bernie- "We will not monetize the debt"

At this point for today, it's following the signals and indicators as usual.