Week in FX Europe – ECB Is Moving The Market, But Not The Economy Just Yet

The ECB did not need to take on any additional, more aggressive stimulus this week – instead they had Draghi mouthing deposit rates and negative yields. In the end it had the same impact as an aggressive cut – the single currency happened to plummet three-big-figures. Investors were mostly looking for this weeks ECB rate ease to be the first on a list of measures to support a Euro-zone recovery. In the end all they might be getting is an ECB that is able to move the market and not the economy.

Why did Draghi say that his Central Bank was “technically ready” to take the deposit rate into negative territory? The predominant reason would most likely be because of Germany – the backbone of Europe. Capping the EUR against the currencies of Germany’s major export market would help the Euro-zones largest economy avoid any prospect of its domestic industry having the need to restructure to maintain its export prowess.

Is he really that good at manipulation? The ECB must be doing something right, the current yield on Greek 10-year debt is trading just below +10% for the first time in nearly three-years. Just under a year ago it was trading north of +41% and yet the debt crisis remains unresolved. Investors seem comfortable having Draghi and the ECB as the last resort backstop!

• Danish Banks seeking bailout legality
• European Stocks Open Higher Ahead of US NFP
• Euro Weaker Across the World on Draghi Comments
• Asian Stocks Rally on ECB Negative Rate Option
• ECB Cuts Rate for First Time in 10 Months
• Draghi Looking Likely To Deliver ECB Rate Cut
• Attention Turns to ECB
• Europe Unemployment Hits Record High
• Spain GDP Contracts 0.5% in First Quarter
• Italy’s PM Letta Plans to Follow EU Budget Rules
• Greece Passes Law Needed to Receive Bailout
• Political Stability Reduces Italian Cost of Debt
• Swiss Central Bank Discloses 20% of Gold Reserves Held in England
• BOE McCafferty Sees Improved Outlook for UK, Remain Cautious

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