ECB’s QE Impact Fades Already
On March 10, ECB president Mario Draghi pulled out his bazooka and fired what was supposed the be a shock and awe blast of QE that would sink bond yields and the euro.
Instead the euro rallied along with yields on European bonds. Traders front ran the the announcement and the trade is unwinding.
European bonds had their worst month since August.
Bloomberg reports ECB QE Boost Can’t Save Euro Bonds From Worst Month Since August.
Shock and Aw Shucks Revisited
Actually, the announcement fizzled immediately.
I said so on March 10 in Draghi’s “Shock and Awe” campaign morphs into “Shock and Aw Shucks”
Euro Daily Chart
Draghi was hoping the euro would sink to boost inflation and help exports. Instead, after a brief intraday selloff, the euro rallied and it has continued along that path.
What Happened?
Clearly the trade was front run, but there is a bit more to it than that.
Draghi has simply run out of room to cut rates further into negative territory. It has to do with mortgages and bank losses.
For the full explanation, please see Is There a Limit to Draghi’s Negative Interest Rate Madness?
Mike “Mish” Shedlock
Disclaimer: The content on Mish's Global Economic Trend Analysis site is provided as general information only and should not be taken as investment ...
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