ECB head Mario Draghi, in what has become an all too familiar song and dance, reiterated his extend & pretend mantra in today’s ECB presser, namely stating that country level structural reforms combined with accommodative ECB policy (low interest rates and continuous QE program) is the recipe to achieve Eurozone growth and an inflation rate near its target of 2.0%.
We’ll take the other side of the “hope” embedded in that positing! And it’s one we’ve long espoused and expressed as our 3Q15 Macro theme of #EuropeSlowing (published on July 7, 2015).
What was new in today’s presser? Very little: Draghi kept main interest rates on hold (as expected) but did clearly signal that the ECB is in fact in wait and “monitor” mode until its December 3rd meeting when the ECB’s staff releases a new growth and inflation outlook for the region. Expect forecast revisions to go one way – down!
The EUR/USD is down -1.4% since Draghi’s remarks this morning, indicating that investors are already baking in the cake an extension to the QE program come December.
We continue to suggest that you trade the risk range in the EUR/USD based on our quantitative multi-factor risk signals, and risk weight what our good friend Jim Rickards has penned the Currency Wars.
This morning the EUR/USD broke its immediate term TRADE/TREND level of $1.12, a bearish signal for further downside support if it can hold for at least 3 trading days.