Macro Digest: It's time for the ECB to panic
Chief Investment Officer
Summary: Today's European Central Bank outing sees ECB president Mario Draghi staring down a wall of negative incoming data amidst the lowest EURUSD volatility in history while markets look for a policy response.
The market has priced in TLTRO operations; look at the Stoxx Bank Index (SX7E), which is up by more than 14% year-to-date. Consider as well that the Bundesbank does not favour further buying.
We are in a period of record low volatility in EURUSD, with today's meeting having the ability to shake things up significantly, depending on the ECB's statement.
The market is more likely to be disappointed by any potential 'delays' raised in today's announcement. In our view, such an outcome could see EURUSD break 1.12.
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