Draghi did not deliver QE. Not now. After reasserting his leadership in November, it seemed that he approached a wait and see mode as the Germans gave a big fight this time.
EUR/USD is rising, up 2 trading range and challenging a third one at 1.2440. Does this mean we’ll see an ongoing Christmas rally for the pair? Or is the party to early? We’ll opt for the latter option, and here are 5 reasons, takeaways from the big ECB event:
- ECB not doing its jobs according to its own measures: Inflation forecasts have been cut to 0.7% in 2015 and 1.3% in 2016. These are not only significant downgrades but it also means the ECB will continue failing on its mission for another 2 years.
- And it could get worse: Inflation forecasts don’t include the most recent slide in oil prices: this could be enough on its own to trigger another downgrade and imminent action.
- Preparations are accelerating: Draghi said in the statement and discussed the topic over and over again during the press conference. This is a big change from the taboo nature the mere mention of QE had not too long ago.
- Unanimity not needed for QE decision: This is a statement that Draghi repeated. This seems to be partially true. But more weak data would loosen German opposition.
- No legal hurdles for the ECB: The firm statement, defying the German professors who challenged the ECB in Germany’s constitutional court ended with Draghi’s last word: “not pursuing our mandate would be illegal”.
What do you think?
More: EUR/USD: N/T Wedge & L/T Trend Support Align – Nomura.
And here is the chart with the lines at 1.2360, 1.24 and 1.2440 which is fought upon at the time of writing:
