2019-12-20 2018-06-15 Bullfight for EUR/USD Dmitri Demidenko 2019-12-202018-06-15

Mario Draghi manipulates euro

Euro bulls fell for torero Draghi’s tricks

Giving a helping hand, don’t forget to dodge a kick of gratitude. The European central bank extended quantitative easing program through December, perfectly understanding that the Eurozone economy will have hard times without it. Mario Draghi announced the ECB willingness to maintain its ultra-easy monetary policy till at least September, 2019 and promised to quit it soon after. Super Mario has a super power to handle euro by means of smart words; just like a snake charmer manipulates a snake with a flute. For example, the last six press conferences were steadily sending the EUR/USD down. In June, it has featured the worst drop for the last couple of years...

The ECB discovered its super power: it can travel in time. Though, it can just go forward and very slowly. QE pace will be reduced to €15 billion starting from September; the negative interest rate will be retained until next summer… Quantitative easing program will go on, so they can stand driving to work every day. Another matter is to wait for eight hours to leave it. And this is really exhausting.

The European central bank is dragging its heels not just because it is willing to help the currency block economy. Rather, it doesn't feel like entering a cheap panic room (the dark one, packed with traps) once again. During the recent decade, the ECB has raised the interest rate twice and twice it has been caught in the throat. In 2008, monetary restriction was followed by the world crisis, and in 2011, the European stock market featured a collapse. Third time’s a charm? A sick joke, no less.

Mario Draghi took a really wise decision, when you have your cake and eat it, too. The Governing Council’s hawks found comfort in the information of QE end, doves – an open door, like the promise to extend the easy-money program. Giving up buying assets is as hard as giving up alcohol. The doctor can spend hours, explaining you how bad it is for your health, and, in the evening, your neighbor winks to you, shakes a glass, and you are much more convinced by his reasons.

Anyway, it was quite exciting to watch dollar and euro dancing to the flutes of the central banks: Jerome Powell’s optimism and the FOMC increased expectations for the main macroeconomic indicators drove EUR/USD up; the ECB’s announcement to end the quantitative easing program pressed the main currency pair down. I know that all the world’s a stage, but following these events, I have a feeling that we are in a circus again. In mid-June, there was staged a performance, where the European central banks, first, let the Federal Reserve be sooner, and then, changed their places in terms of the influence on the currency values. Mario Draghi invited euro bulls to a bullfight, and they could nothing but die at the masterful tilt by a torero with Italian blood...

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