I’ve got Draghi fever, she’s got Draghi fever
We’ve got Draghi fever, we’re in debt
She’s gone Dollar crazy, I’ve gone Euro hazy
Ain’t no thinking maybe, we’re in Debt
The ECB kept rates on hold this morning but that doesn’t matter.
What matters is the unveiling of Mr. Draghi’s mad plan to boost the EU Economy (such as it is) through a bond-buying program of AT LEAST $55Bn per month.  Anything less than that will be VERY DISAPPOINTING as the markets have already baked in some massive QE from Draghi and the ECB.Â
Realistically, there’s almost nothing Draghi can do to “fix” Europe today or to meet the inflated expectations of the market. Â
Sure we may get a pop on a nice program but it’s not likely to last and we still have the Greek elections on Sunday, which can throw the whole Union back into turmoil next week.
As you can see from the chart above, Draghi is expected to annound a stimulus program that already puts the ECB’s balance sheet back to where it was at the height of the Greek crisis (the 2nd one) and that’s without (officially) a new Greek crisis – so it’s a Hell of a lot of firepower spent just to fight the deflationary bogey-man. Â
As noted by Bloomberg, Draghi still has to negotiate the tricky issue of buying government bonds at the negative yields currently prevailing across much of the euro zone. Paying for the privilege of storing money in, say, a three-year French bond effectively locks in a capital loss if you get back less than you paid.
A lawyer could argue that that constitutes “monetary financing” of governments, which is forbidden by the monetary union treaty. Draghi has already seen off one legal challenge to his power to buy bonds; that fight may be rekindled in the near future.
8:40 Update: Â Draghi announces 60Bn Euros per month of easing ($70Bn), so 20% more than expected and it’s through Septermber 2016, at least! Â That sent our Futures up over our bullish target levels (see early morning Member Chat) and we’ll stay long but flip SHORT on the Futures if the following levels fail:
