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Draghi, master of economic innuendo

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  • ECB President Draghi gave a fine burlesque performance yesterday - he hinted broadly, he winked saucily, and he basically said that the ECB is going to ease policy without actually saying the ECB will ease policy.
  • Our European team got the message, and forecast a 15bp easing in June (taking the discount rate negative). This is a strategy with some risks - food inflation, and therefore inflation perceptions, may rise this summer (against the backdrop of negative rates).
  • Fed Chair Yellen, meanwhile, was trying to perfect her poker face and give nothing away when it comes to policy. She was explicit in saying nothing as to where the Fed's balance sheet would end up.
  • The data calendar is pretty quiet. Chinese inflation was a little lower than expected, and UK industrial output data is due. Eastern Ukraine plans to try and hold a referendum on independence on Sunday, but there are no sanction threats around this, muting the market relevance.

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