Draghi disappoints whilst dollar breaches 120

Draghi spoke with a whimper not a bang as he failed to provide the Eurozone with an early Christmas present, with the markets reacting poorly to his vague comments on quantitative easing.

Many expected the ECB president to announce firm action on Eurozone stimulus, with some kind of date timetabled. However, Draghi provided more platitudes, with the markets finally reaching their breaking point with how much ambiguity they were willing to accept from the ECB. Whilst Draghi said that he ‘won’t tolerate prolonged deviations on price stability’, he failed to provide any new information. He even went as far as downplaying QE intervention any time soon, claiming that the previous tentative first quarter 2015 date for stimulus doesn’t necessarily mean the next ECB meeting.

There were some dovish elements to Draghi’s speech, as he praised the effects of QE in the UK and US, leading to ominous words for Germany. Draghi stated that the QE decision did not need to be unanimous, seemingly a warning shot to those in Germany who are standing in the way of any QE implementation.

Unsurprisingly the DAX fell by over 100 points to hover around 9872; and as the German index goes down, the euro rises, growing 0.6% against the dollar to hit 1.24148. Whilst the euro was one of the few benefactors from Draghi’s vague comments, as its short-term fears over QE were calmed, a weak Eurozone economy is not a boost to the currency either, so these gains may not last.

The FTSE, suffering after yesterday’s Autumn Statement, needed Draghi’s vagueness like a bullet to the head; yet it received that bullet nonetheless. The UK index continues to be weighed down by both its own woes and that of the Eurozone, falling 0.5% to 6672.

The Dow Jones, despite better than expected unemployment claims, couldn’t escape the market volatility that had infected Europe after the ECB conference. This caused the US index to fall to around 17866 after opening 0.5 lower than yesterday’s record close at 17904.5. The Dow will be hoping to recover this ground before close, as tomorrow sees the release of the non-farm unemployment change figures, figures that are traditionally a cause of much volatility on the markets.

However, whilst the Dow slipped, the dollar finally breached the 120 level against the yen, the target it had been promising to hit for much of November. The perfect storm of Japanese QE coming at the end of US quantitative easing led to a 7 year high for the USD/JPY, and alongside a record-breaking Dow the dollar finally reached the 120 level as Japan, and the yen, face pre-election jitters.