European Central Bank

On May 18, 2015, the ECB's Benoit Coeure held a closed-door speech under "Chatham House" rules in which he leaked to an audience of hedge funds in London that "the central bank would moderately front-load its purchases in its quantitative easing program because of the seasonal lack of market liquidity in the summer." The reaction was an instant 50 pips drop in EURUSD as one or more funds decided to ignore the "rules", and promptly traded on the material, market moving leak.

During the months of March and April of 2016 we released a series of proprietary research reports indicating signficant weakneses that we found in the European banking system and released it for sale through the blockchain (reference The First Bank Likely to Fall in the Great European Banking Crisis).

The overnight session has been one of alternative weakness and strength: it started in China where stocks tumbled 2.8% to a two month low following an unexpected warning in the official People's Daily mouthpiece that debt and NPLs are too high, not to expect more easing will come, and that the Chinese Economy’s performance won’t be U- or V-shaped but L-shaped.

One week ago, Deutsche Bank's Dominic Konstam unveiled, whether he likes it or not, what the next all too likely step will be as central bankers scramble to preserve order in a world in which monetary policy has all but lost effectiveness: "It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes."

Following the denial in February that this action is in any way about reducing cash, The ECB has made its decision on the EUR500 Bill: