Some in the press are blaming today’ dollar weakness on comments from Buba’s Weber earlier today downplaying additional stimulus. Additional to the quarterly one year term-refi operation, the first of which is set for tomorrow.
Before the ECB lends a European dime, its balance sheet will stand at $2.42 trln versus the Fed’s $2.074 trln. When was the last time you heard anyone screaming about the out- of -control growth of the ECB balance sheet? (Cue crickets…). Here in the States there is a robust cottage industry that does nothing but shout about the debasement of the dollar by the central bank. The ECB is pursuing related, though not identical policies, though the end results are the same: trillions of liquidity pumped into the global monetary system.
Estimates for demand at the one-year refi range from EUR 300 bln to as much as EUR 1 trln. The ECB will lend to any bank with eligible collateral in unlimited amounts. It should be fascinating to watch. And fascinating to see if the market is spooked by a big takedown at tomorrow’s auction. Today’s price action would suggest no, but Monday’s action would suggest yes…I’d side with Monday…
