Talking Down the Good News
It was all plain sailing for the euro on Thursday until Draghi found an opening to express his ‘openness’ on negative deposit rates. Well aware that this was probably the only ‘conventional’ way to bring down the euro, this was a successful way in talking down the currency without even mentioning it. If we can also extrapolate now that Draghi’s words meant the ECB is uncomfortable with a stronger euro, especially with the disinflationary pressures that it brings, Thursday’s press conference would mark the beginning of a new phase in communications strategy which the market will have to adjust to. On a technical level, this actually can work, but we caution that ‘diminishing returns’ will become apparent before long.
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