Thoughts on the ECB Tonight – Remember Last Month !
After 6 years, I am getting tired of markets sitting around and hanging on every word that comes out of the central banks or finance ministers or Shinzo Abe.
And memories are so short that people do not remember what happened at last month’s ECB meeting and the currency carnage that resulted that led to EURUSD setting a 1 year high before crashing all the way down ?
It is a worrying fact that the central banks are playing such big roles in the market and dominating market sentiments for investors and traders to have forgotten how to trade fundamentals or technicals, for that matter.
We have the ECB today and positions are heavier than ever, knowing they have only 1 course of action to cut rates to combat their unhealthily low inflation..
The expectations today is for the ECB to cut their Refinancing rate to 0.1% from 0.25% and their Deposit Facility rate to -0.1% from 0%.
This will be a crowd pleaser outcome given that Eurozone inflation has been well under their target 2% since Oct last year and we need inflation to create more wealth. Yet too much inflation will erode wealth so how do they propose to control everything to the dot ?
I personally prefer central banks to save bullets for rainy days but it is more of a popularity contest amongst the central banks.
If June will repeat May’s script, I expect we will see EUR/USD break 1.35 later on today before the rate decision and then probably rebound back as if nothing happened just to keep volatility at zero.
With no arrests or investigations made after last month, I expect we can just throw all those trading rules away and wait for the stop loss algos to come out for the hunt.
Good luck !