“First, it is committed to experimenting even more with its use of unconventional monetary policy, including by taking the deposit rate even more negative and starting a program to purchase asset-backed securities.â€
What the ECB’s Moves Mean for the World by Mohamed El-Erian
He lays out Draghi’s scheme pretty well. Read a good article by a smart man. But the problem in Europe is that the Euro strength they are trying to leverage was simply a counter trend reaction out of the first ‘acute’ phase of the Euro crisis in 2011. In essence, they are leveraging a 2 year Bear Flag (or Rising Wedge) in the Euro that always was likely to fail at the big trend line. Yeh, that should work well for Europe.
Oh but then there is Fortress America. Our currency is strong and our markets booming. Nothing wrong here! Well, we’ll see how long the ISM for example, stays strong with the USD becoming persistently strong.
Wasn’t the whole premise of the US recovery its ability to compromise Uncle Buck? I’d imagine that US stocks can go well higher on the old ‘King Dollar pulls in global liquidity’ play, but there is a shelf life here if Unc gets persistently strong with two drivers at his back; the Euro trash fest and US policy that could have its hand forced toward tightening sooner than maybe the majority now thinks.
As I wrote the other day, it is hard to know exactly what will play out when, but it sure is getting interesting.
