Thank you ET for the beautiful preview. Tomorrow is Draghi's second last meeting as ECB head and he is going down as the only ECB chair who never hiked. Started with a cut and very likely ending the same way.
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DislikedEuropean Central Bank Meeting • Thursday 12.9.2019. The European Central Bank (ECB) will meet tomorrow in what is likely to be a crucially important meeting. The Eurozone economy has continued to tread water, with decent service sector data offset by a mightily struggling manufacturing sector. Thus far, these two forces have acted as roughly balanced counterweights, keeping the Eurozone economy out of a recession and allowing the ECB to stay on the sidelines. As more time has passed without a rebound, however, monetary policymakers have grown increasingly...Ignored
DislikedSpecifically, I expect the ECB to buy €45 billion a month in sovereign bonds for the next 12 months.Ignored
DislikedThank you ET for the beautiful preview. Tomorrow is Draghi's second last meeting as ECB head and he is going down as the only ECB chair who never hiked. Started with a cut and very likely ending the same way.Ignored
DislikedEuropean Central Bank Meeting • Thursday 12.9.2019. The European Central Bank (ECB) will meet tomorrow in what is likely to be a crucially important meeting. The Eurozone economy has continued to tread water, with decent service sector data offset by a mightily struggling manufacturing sector. Thus far, these two forces have acted as roughly balanced counterweights, keeping the Eurozone economy out of a recession and allowing the ECB to stay on the sidelines. As more time has passed without a rebound, however, monetary policymakers have grown increasingly...Ignored
DislikedI will have a preview up later tonight on the ECB meeting as well.Ignored
DislikedI'm thinking a rate cut is more likely than a resumption of QE. I certainly hope we get a €45 billion purchase program for gold's sake, I've just seen the ECB disappoint the market so many times it's what I've come to expect from them.Ignored
Notes
Prior Impacts on Gold and Euro (EUR/USD and EUR/JPY).
March
April (The arrow points to the start of the ECB Press Conference)
June
July
Overview
QE announcement is the focus - will it be QE or a 'stimulus package'
This is a topic of contention and policy makers have raised their voices about it. Bundesbank President Jens Weidmann and Dutch Governor Klaas Knot have argued the current economic situation doesn’t warrant QE, while France’s Francois Villeroy de Galhau also signaled skepticism. Sabine Lautenschlager, a member of the ECB executive board and Estonian central bank President Madis Muller have also cast doubt on the scale of intervention.
Draghi does have at least one ally. Ollie Rehn, president of the Bank of Finland recently called for an “impactful and significant” stimulus package.
Some form of QE is expected. Defying market expectations could push market rates higher and pose further risk to the economy. An announcement of a repricing of the TLTROs and a restart of QE with 30 billion euro per month is one possible scenario. This would deliver what the market is looking for. Any stimulus package without QE will disappoint. A big disappointment.
Rate cuts? Probably only in one of the three rates. The ECB to take action on the depo rate -- 15 basis point cut is priced in
The cut in the overnight depo rate will either be 10 or 20 basis points. I'd expect volatility on the announcement. The market isn't expecting rate cuts in the marginal lending facility or main refinancing operations.
Expect changes to Inflation outlook, Growth outlook. Downward revisions to staff projections.
Likely scenario:
Inflation Outlook - Previous: Over medium term underlying inflation expected to increase. New: data suggests a pickup in inflation to take longer.
Growth Outlook: Previous: growth expectations tilted to the downside. New: Recent activity suggesting a slowdown in growth. The change in language will be accompanied by downward revisions to staff projections.
The market's expectations are high
All the way back when Trichet was hiking rates well into the financial crisis, the ECB has a funny way of consistently surprising the markets. This ECB meeting comes at a time when other major central banks are easing policy, Germany on the brink of recession, and a weak inflation outlook the market expectations are tilted in a way where it's putting the ECB at risk of disappointing the market. The general consensus is that policy makers will announce a series of loosening measures that won’t really make much of a difference to the struggling European economy. Anything short of not using the most effective instrument (QE), might be taken as quite the disappointment in light of Europe's struggling economies.
As a trader, more important than anything else, here's what I think is most important to know.
Draghi earned his nickname. Super Mario. The last time he faced major opposition was in January 2015 when he pushed through large-scale asset purchases. I expect the decision out of the ECB to reflect what Draghi believes is best. Being his last appearance as ECB chief, expect him to deliver to what the market's expecting. In his last meeting, he could leave with a bang and put forward something significant.
Whatever Draghi goes into the presser with, he's already decided. He'll enter that conference with a mission to deliver something very specific, whether dovish or hawkish tone. He's good. Look for the trend that emerges after Draghi begins to deliver his press conference. There's a reason why the euro and gold (and others) take a direction and continue throughout the question and answer session. Draghi sticks to his message.
I'd recommend waiting until Draghi takes the mic and then looking to enter the market.
There are many scenarios that could play out. Anything is possible. That's why, as always, caution is advised.
DislikedLOL! Dis is some good analysis ET! So whatchu saying is we shud go long?!Ignored
DislikedThat's a recipe for disaster. Unless you are the ultimate risk taker. Then in that case, I'll go grab my popcorn!Ignored
Disliked{quote} Depends on which market. I'll post a preview later. Currently i believe that retail sales will come in a bit lower then the forecast. If this does happen that will be negative for the stock market which keeps rising despite negative data. So i'm not sure if they'll start a fire or actually put out the fire of the current stock rally. If they do come in lower that could provide a solid boost for gold though.Ignored
Disliked{quote} Depends on which market. I'll post a preview later. Currently i believe that retail sales will come in a bit lower then the forecast. If this does happen that will be negative for the stock market which keeps rising despite negative data. So i'm not sure if they'll start a fire or actually put out the fire of the current stock rally. If they do come in lower that could provide a solid boost for gold though.Ignored
Disliked{quote} U.S. core consumer prices have posted solid gains recently but are likely overstating the amount of inflation pressuresIgnored
DislikedThe interest rate on the deposit facility will be decreased by 10 basis points to -0.50%.Ignored
DislikedNet purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billionIgnored
Disliked{quote} I've prepared a dish for myself. I've got some longs running on both DAX and S&P 500 for a while, they're in solid profit... i was really undecided whether to close them or not before the ECB meeting. In the end i decided to keep the positions open anyway. We'll see how it goes.Ignored
DislikedWhile that disappointed, they may have made up for it by not setting a timetable. QE infinity?Ignored
Disliked{quote} Nice job Vorenzd, I'm long the S&P too. It came close to setting a record high today and I'm pretty confident it will in the next few days.Ignored