Mario Draghi’s turn to disappoint the wise money markets

As the wise money markets continue to digest the ECB rate decision and subsequent meeting yesterday we have seen the retracement of GBP/EUR and the strength of the world safe haven currency, the US Dollar. Mario Draghi's turn to disappoint the wise money marketsECB President, Mario Draghi, announced a rather bearish statement focusing on the fundamentals of the system on the long term rather then providing the immediate ‘bazooka’ that investors were expecting after last weeks announcement.

Mr Draghi strongly hinted that the Securities Markets Programme or bond buying scheme would likely continue on the requirement that European governments approach the current bailout fund, the EFSF, for an official request for aid which in turn will allow the ECB to continue the bond buying scheme.

This may be because of pressure and apprehension from the superpower Bundesbank.

Mariano Rajoy and Mario Monti also met yesterday to discuss the problems they are respectively facing in the markets and their debt problems with both nation struggling it was thought they could ask for a formal bailout from the ECB or EFSF/ESM with Spain calling a government meeting today in what could be the first country to ask for the bailout funds to step in as their bond yields have surged over 7.345%.

The BoE interest rate decision did not pull any surprise comments with the interest rate being kept on hold much as anticipated.

Although, there was talk of a interest rate cut it was quickly quelled as the MPC thought it may hinder UK banks ability to lend.

It is clearly apparent the bank needs to come up with a definitive plan to combat the slowing economy with the strong contraction seen in construction figures being one of a number of alarming figures of late.

On the ECB announcement the markets shook with volatility with EUR/USD hitting the weekly high of 1.2402 before falling sharply to 1.2172 with the utter disappointment from the lack of a definitive plan from the ECB president.

We also saw large swings in GBP/USD with it rising over a cent on the day to a high of 1.5678 from a low of 1.5522.

After the euro initially strengthened it weakened back to the highs of GBP/EUR for the day of 1.2765 from the lows of 1.2638. Spanish bond yields have shot up from 6.60% to 7.16% and Italian Bond yields also shot up from 5.75% before he spoke to 6.33% after he spoke.

We saw sharp falls in the major stock markets across Europe reversing earlier gains with the FTSE, DAX and CAC all finishing in the negative with Wall Street and Asian trade following the same pattern after the disappointment of the days events.

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