Media buzz coming up to the ECB rate decision was somewhat subdued, most of the buzz agreed that Draghi won’t do anything today, after what he did in December 2015.
I wasn’t comfortable with today’s event so I decided not to put on my straddle and instead followed the market.
After the announcement that there was no change in interest rates and repurchase, the EURUSD stayed steady at 1.08990.
Seems that the market was looking forward to the press conference to ascertain how dovish or bullish Draghi was going to come across.
During the first few minutes of the press conference when Draghi was reading from the statement, the EURUSD shot up to 1.0925 when he said that the monetary policy taken in December was correct, more importantly, that it was in response to the economic situation. He kept talking about comparing the monetary analysis and the economic analysis in deriving the appropriate monetary policy.
Then, when he started to say that the ECB has unlimited policy actions available to act if necessary, the EURUSD began to slide dropping back to 1.0880.
When it started to move down to 1.0850, I decided to chase the market and short the EURUSD at 1.0850. Draghi further commented in the Q&A, that the ECB will review to reconsider to further easing if necessary and that it has unlimited tools it can use to achieve it’s goal. The EURUSD continued its slide down to 1.0788. At about 1.0791, I decided to square off the position and made a tidy trading profit of 59bps. All this happened within the first 20mins of the press conference.
Ok, now I can peacefully spend Friday with my wife, to shop for the coming Chinese New Year, more importantly, we are indulging in a spa session tomorrow………..bonding time.
If I don’t get to wish everyone, here’s wishing all a great weekend.
The Panthenon Investment Group 