"...tomorrow's ECB meeting is probably one of the most anticipated events since the F_E_D ended QE, with the expectation among the "Buy the Dip " crowd or the "This time it's different" crowd, being that the ECB will pick up where the F_E_D left off and run with the sovereign bond QE purchases, despite the fact it's against their charter. You'll get no argument from me that something needs to be done with the deflation monster, but ever since I can remember expectations being set, they have been set for the ECB at least making a clear hint of QE at the December meeting (tomorrow). However there seems to be a stand-off between EU governments the ECB wants to make reforms that it believes are necessary for QE to be of any use (did I mention it is outside their charter?) and the governments themselves unwilling to make any changes, but of the opinion that Draghi should do his job regardless (despite the fact his job doesn't allow for sovereign QE). Recent Draghi and Constancio dovish comments and a lot of them have many thinking some kind of hint will at least be dropped, kind of like, "We're hiring Black Rock to advise us on sovereign QE purchases". However nearly all dovish comments made have plausible deniability, like Draghi recently saying they want to get inflation expectations back up to 2% ASAP, well the market takes that as QE is imminent as it has a tendency to cause inflation, however he's making a common sense statement that the market or elements of the market choose to interpret as QE and Draghi seems to be fine with that, his hands are still clean, he didn't say anything about QE in that statement."
And this morning after the ECB left everything unchanged, Draghi's press conference shows all of that dovish jawboning was exactly that and it wasn't him that said QE was imminent, it was his ambiguous remarks that the market to mean imminent QE, but as I said above, he has plausible deniability as the ECB head says what really counts in his press conference and the market likes it none too much...
- *DRAGHI SAYS ECB TO REASSESS CURRENT STIMULUS NEXT QUARTER
- *DRAGHI SAYS ECB MAY NOT DECIDE ON NEW MEASURES IN JANUARY
- *DRAGHI: DECISION TO CHANGE BALANCE SHEET LANGUAGE NOT UNANIMOUS
So instead of imminent QE or any QE, there's just a simple reassessment and one that will wait another quarter! As for January, let the market down easy or not... and changes in the balance sheet..well the bottom line is Germany will probably NEVER be on board with QE and the EU is Germany while the ECB is Goldman Sachs. It's all about the charter for now.
The market's reaction, S&P futures....
And Tf/Russell 2000, the one with the strongest positive divegrence and leader the last 2 days, looks the worst and this is the stronger 7 min chart...
It should be an interesting day as the levers have given way or are about there.
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