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Draghi reveals all

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  • If one were to rely on the international media for information, the European election results were a stunning surprise. If one relies on reality (as markets sometimes do) they were in line with opinion poll predictions for the most part. Markets have reacted accordingly.
  • The risk is not the sudden shock of the European result but the evolution of sentiment by investors outside the Euro. Non-Euro investors have been a source of capital inflows, and political confusion may deter that.
  • Draghi of the ECB followed up his burlesque press conference with a full blow strip tease, casting aside every last vestige of hawkishness in a brazenly dovish display. He warned of disinflation (disinflation being the reverse of what is happening in the Euro area today).
  • The UK has mortgage application data. The housing market should concern policy makers only as it disrupts financial system or household balance sheets, so this evidence of credit is pertinent. BoE governor Carney is due to speak.

Listen to the audio version of this briefing.