Today is the day! So exciting, because there is finally going to be some clarity about the “stimulus” that’s going to be unveiled by the European Central Bank. There was a long buildup to this day, since the Chair Mario Draghi announced such stumulus back in January when the selloff was in full swing. There was no hint of how much, but investors were nonetheless pacified that help is on the way. I am trying to recall whether the ECB has a history of really giving generous support to investors and I think it’s a mixed bag. Here’s some handy articles dug up by Google .
http://www.wsj.com/articles/ecb-cuts-deposit-rate-draghi-to-announce-further-measures-1449147451
http://www.marketwatch.com/story/heres-how-the-ecb-disappointed-markets-as-it-expanded-stimulus-2015-12-03
— ECB stimulus booed by investors last December. (Then the following month Jan 2016 – we had the special announcement)
So because I just wasn’t oozing with confidence about the ECB move, I went snoozing. Yes, no positions. I had a feeling the market could go up anticipating the stimulus, but especially from last night, it was quite volatile. Calculating my risks, I decided it is just better to wait for the decision and trade on the confirmed direction of the market — because the thing is, the stimulus is sure to be given, but it remains to be seen how strong it will be. I think ECB will have a bias for a stronger stimulus since their last stimulus program was announced (Jan 2015), there is no significant growth achieved. Is there? I haven’t noticed 🙂 The last program indicated 60Billion Euros per month — how big does this new one need to be? Another 60 Billion? So even that “matching amount” may not be enough. And then there’s the question — if it is so high, are the risks so great? Does the low of price of oil and China’s much slower growth pose risks bigtime?
We shall see.
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Related Articles
http://www.bloomberg.com/news/articles/2015-10-22/draghi-repeating-ecb-history-primes-euro-area-for-fresh-stimulus
“There’s very strong expectations that we’re going to see further stimulus from the ECB, and the real question is how strong that stimulus will be,” said Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm. “We’re seeing a more supportive environment for risk assets going forward.”
http://www.bloomberg.com/news/articles/2016-03-09/asian-equities-set-to-rebound-with-aussie-kiwi-down-on-rate-cut
