ECBs unhelpful ambiguity

European stocks are edging higher ahead of the long bank holiday weekend, ending the week not far from where they started as investors mull the latest policy decisions, inflation data and earnings.

There’s been a number of interest rate hikes this week, some more expected than others, while the ECB has instead opted for the usual cocktail of unhelpful ambiguity. Anyone hoping for a hawkish hint ahead of its next meeting and forecasts will no doubt be very disappointed, albeit not surprised.

It was, of course, very kind of President Lagarde to clear up a few things. For example, net asset purchases will end in the third quarter – yes, while other central banks are engaging in fear-induced rate hikes and quantitative tightening, the ECB is gradually winding down QE – and the conclusion of the process could come early or late in the quarter.

Following the conclusion of its asset purchases, the ECB will start raising rates some time after. What constitutes some time? That could be anything from a week to several months. I hope that’s cleared everything up. Don’t we all feel much wiser for having followed that press conference?

I understand the ECB is extremely hesitant to guide the market in the absence of up-to-date economic projections but days like today just make me wish they’d stick to quarterly meetings. There is nothing of substance to take away from today’s meeting and I can’t help but think the market remains far too ambitious in its interest rate expectations this year for a central bank that still thinks bond purchases are warranted.

Of course, its situation is far more uncertain than others, given its proximity and higher exposure to the war in Ukraine, while wage inflation remains far more muted than elsewhere. But it’s clearly not learned the lessons from other central banks and may be forced somewhere down the line to drastically change its stance. Whether that will be this year, I’m not convinced.

Bitcoin heading for further pain?

An encouraging rebound in bitcoin on Wednesday was short-lived, with the cryptocurrency once again in the red on Thursday. It appears to have struggled around the midpoint of Monday’s sell-off which could be viewed as a bearish signal. I’m not sure I’ll read too much into that but it’s certainly lost all breakout momentum in recent weeks. It continues to trade more broadly in its 2022 recovery channel and recent price action suggests it could be heading for another move towards the lows. That’s around 10% from the current price and a break below here could be a very bearish development.

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