A Whiff Of Panic & The Pretense Of Europe’s Monetary Cranks
By Tyler Durden
June euro futures, 20 minute candles. At first, the euro did what it was “supposed” to do – and then it went “yen” on the Dragon and his minions – click to enlarge.
Similar scenes played out elsewhere. Here is for instance a 20 minute chart of the June Bund futures contract, which was subject to a similar sudden change in market opinion:
Instant hangover in Bund futures – click to enlarge.
Other playthings were similarly impacted, from the DAX to gold. All the stuff that used to habitually react in a certain manner to more ECB largesse essentially did the opposite of what it was “supposed” to do.
Readers may recall the last time when a similar thing happened. That was on occasion of Kamikaze Kuroda’s attempt to smite putative yen bulls by cutting the BoJ’s deposit rate into negative territory.
That didn’t quite work out as planned either… – click to enlarge.
Kuroda “only” decided to emulate the fashionable new European central planner absurdity of imposing negative interest rates, which means that according to the Keynesian rule-book, he “didn’t do enough”. However, it was a surprise move, as he seemingly had publicly ruled out negative rates only one week earlier.
As we have previously remarked, this adverse (from the perspective of the planners) market reaction had to be taken as yet another sign that the irrational faith of market participants in central bankers is beginning to crumble.
Evidently Draghobert concluded from this that he had to throw the whole kitchen sink and then some at the markets, so as to dispel the misguided notion that he was “running out of ammunition” (this idea is indeed misguided – there is no limit to the madness central bankers can inflict). This is what came over the wires ahead of his press conference:
“At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.
(2) The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.
(3) The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.
(4) The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.
(6) A new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity …read more
Source: A Whiff Of Panic & The Pretense Of Europe’s Monetary Cranks
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