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This afternoon’s speech by Mario Draghi had been hotly anticipated as investors’ expectations around the European Central Bank’s future actions were far from unified. The first step in allowing Greece to try and regain some sort of stability has been the increased financing of the Greek banks with the renewed flow of Emergency Liquidity Assistance at a fresh limit of €900 million.
The ECB has also overseen a short-term bridging loan of €7 billion for the Greeks to meet their looming debts. This does have the feel of merely robbing Peter to pay Paul, but Mr Draghi looked happy enough regardless.
This evening will see speeches from both Bank of England governor Mark Carney and Federal Reserve chair Janet Yellen revolving around their respective abilities to start raising interest rates.
Seasoned market watchers will have already factored in Mark Carney’s comments that an interest rate rise was coming. The issue is not ‘if’, but ‘when?’ Similarly, currency market reaction has shown mild disdain for the suggestion that a rate rise in the US would come before the year’s end.
All of the recent data releases and negotiation developments should have seen markets move closer to what would be termed normal conditions. But, this has not materialised. It could be traders are preoccupied with the golf at St Andrews or the latest test at Lord’s. But it’s just as likely to be their lack of faith in there not being some fresh issue overnight to derail the current period of calm.
One of the first steps in a market recovery is always going to be confidence, and the current ECB QE programme should have been the catalyst for that. However, you can’t help but feel the benefits of this are yet to be fully factored in by traders, who’ve spent the last couple of months leaping from one looming disaster to another.