European Central Bank

With the Fed expected to further tighten financial conditions following its now guaranteed March 15 rate hike, and the ECB recently announcing the tapering of its QE program from €80 to €60 billion monthly having run into a substantial scarcity of eligible collateral, the third big central bank - the BOJ - appears to have also quietly commenced its own monteary tightening because, as Bloomberg calculates looking at the BOJ's latest bond-purchase plan, the central bank is on track to miss an annual target, by a substantial margin, prompting investor concerns that the BOJ has commenced its ow

ECB President Draghi said the "balance of risks to growth has improved" and noted that The ECB had "removed reference to signal a sense of urgency." This combined with the removal of references to the use of all instruments has sparked EUR strength and Bund weakness.

• *DRAGHI SAYS BALANCE OF RISKS TO GROWTH HAS IMPROVED
• *DRAGHI: ECB REMOVED REFERENCE TO SIGNAL SENSE OF URGENCY GONE

Sent EUR higher...

Update: the all-important inflationary forecast has been raised modestly, as follows: 2017 from 1.3% to 1.7%, 2018 from 1.5% to 1.6%, 2019 kept unchanged at 1.7%. He also said the  council will continue to look through changes in inflation if judged to have no implication for medium-term outlook for price stability, and notes that substantial degree of monetary accommodation is still needed. As usual, he adds that the "ECB stands ready to increase asset purchase program in terms of size, duration."

While debates over the significance of the Eurosystem's TARGET2 imbalances may have faded into the background now that sovereign yields in the Eurozone remains broadly backstopped by the ECB's debt monetization generosity, and fears about an imminent European breakdown fall along the lines of populist votes more than concerns about lack of funding, the BIS has finally chimed in with the truth about what the TARGET2 number really showed.

Via Michael Shedlock of MishTalk.com,

A quick perusal of Target2 Balances for January shows capital flight from Italy and Spain to Germany intensified again.

German target2 imbalances exceed levels hit in the Eurozone crises in 2012. Things improved considerably after ECB president Mario Draghi made his famous statement “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough”.

The ECB claims this action is due to its bond-buying program. I strongly disagree.