Just yesterday morning, we said that with the Euro rising as much as it has in recent months (or is that the dollar tumbling), the ECB’s next move could – or should – be to talk down the common currency, instead of carrying the hawkish “bias” Draghi has pushed for the past half year, culminating with the Sintra mini tantrum in which the poor central banker was “misunderstood” by markets. Well, just 24 hours later that’s precisely what happened when this morning the EUR turmoiled, first tumbling then regaining all losses after Reuters “trial ballooned” that the much anticipated Draghi presentation at the Fed’s Jackson Hole conference in just over a week, where he was widely expected to unveil the ECB’s taper, would be a “nothingburger” to use the parlance of our times, and “will not deliver a new policy message” according to two Reuters sources familiar with the situation said, tempering expectations for the bank to start charting the course out of stimulus.
Perhaps having finally seen how high the EUR/USD has risen, an ECB spokesman told Reuters that Draghi “will focus on the theme of the symposium, fostering a dynamic global economy, in his Aug. 25 remarks, while the sources added that he was keen to hold off on the policy discussion until the autumn, as agreed at the last rate-setting meeting in July. “
Well, so much for the narrative set by the WSJ one month ago, which set expectations that Draghi’s Jackson Hole address would frontrun the central bank’s tapering blueprint.
Expectations for the speech had been building in recent weeks with investors pointing to next Friday’s event as the likely kick off in the ECB’s debate how to recalibrate monetary policy given solid growth, rapidly falling unemployment but persistently weak underlying inflation.Â
In 2014, the last time Draghi spoke at Jackson Hole, considered the world’s top central banking get-together, he laid the foundations for the ECB’s quantitative easing scheme, also fuelling expectations for a major speech this year.
“Expectations that this will be a big monetary policy speech are wrong,” one of the sources said.