Thursday 9 January 2014

What's important, we heard today by Mario Draghi?

hello,

After the conference, the President of the ECB may feel a slight hunger. Draghi referred to the most important issues, but clearly not enough. Did not rule out any option, but did not say anything specific. The prospect of easing according to Morgan Stanley and Credit Agricole believe that today's softening of the language is the next step towards loosening, the introduction of the LTRO.

Was dominated questions about inflation, which in December was very low, especially core CPI. Draghi noted, however, that this is due in part to changes basket in Germany, which was expected, and that the path of inflation is not surprising ECB, and only in such case, the Bank will work. In this issue therefore remains to wait for the development of the situation and subsequent readings of inflation, especially in southern Europe, where the threat of deflation is very real.

The most important issue was contrary to appearances, not inflation, but the money market. As a result of stress stress that the ECB is about to carry out European banks repay earlier LTRO, which resulted in December, an increase in short-term interest rates, which means the monetary tightening. Currently, these rates fell slightly, but are still higher than in the preceding period. Draghi noted the problem, which is important, but still lacks clarity. President stated that the ECB will act if the situation deteriorates, but did not specify how to understand the deterioration of the situation (which interest, for how long and how much would have to be increased), nor what means in such a situation will use the Bank.

An important fact is that at the moment it will be hard for an increase in interest rates on the interbank market in the euro area. Which in turn will favor the dollar.

Regarding my trade <here> dated December 22 I decided to lower the stop loss to 1.3650 level.

regards,
oscarjp

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