Markets Not Buying What Draghi Has To Sell

 | Jul 20, 2017 10:33AM ET

There may have been no hints at a September tapering in today’s ECB statement or Mario Draghi’s press conference but traders certainly found reason to drive the euro higher, something the ECB President was clearly trying to avoid.

I don’t think Draghi could have possibly adopted a more dovish stance at the press conference without suggesting that tapering will not happen later this year. Rather than discuss the possibility of tapering, Draghi was determined to avoid laying the foundation for such a move and instead insisted that asset purchases could rise or be extended, a clear attempt to avoid the taper tantrum that the Federal Reserve was forced to contend with four years ago.

What we learned from today’s meeting, though, was that the ECB probably doesn’t have anything to worry about. The market is already working off the assumption that the ECB will gradually phase out bond buying, with the program likely ending by the end of next year, possibly even the third quarter. This was made clear when the euro rallied despite repeated insistence from Draghi that tapering wasn’t discussed and further analysis will be done in the Autumn — in other words, when the ECB next meets in September and has access to the latest macro-economic projections.