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  • 5 months later...

It seems the ECB made impact with the PEPP launched in March, but although its envelope was more than doubled in June, aggregate MFI balance of loans to NFCs didn't move much in Q3: 


Obviously this confirms the point in the dailyfx piece you refer to regarding importance of fiscal stimulus.  Would hence be nice to read an update on status of Next Generation EU ratification.

It looks like the PEPP and fiscal emergency measures may have stabilized growth of consumer credit, which accelerated in December, though:


 ....in spite of tightening lending standards (ECB Q3 bank lending review published Tuesday).

PEPP likely supported EZ equities since March, and Lagarde's apparent determination yesterday may have served for the following DAX rebound (250 points, then faded completely).

However that PEPP - and all other fiscal and monetary policy measures so far for that matter  - were not nearly enough to compensate for the pandemic's impact on the real economy also became obvious in the ECB's "Euro area economic and financial developments by institutional sector: second quarter of 2020" released yesterday:


...DAX today again with 250 points rebound (a bit slower this time):


The 2nd virus wave (which was fully anticipated publicly by leading virologists since q1 but for some reason speculators managed to engineer 75% or more retracements across the board and some new ATHs first....), election risk, delays of fiscal stimulus in US and Europe, and stellar Tech valuations will likely be dominating Lagarde's determination:

So that yesterday was enough to prevent DAX re-entering the area which it had left so smoothly after the legendary Merkel/Macron announcement is highly doubtful IMHO - and before around 11000 I haven't managed to find significant technical support (the May/June move was just to linear...):


Sufficient progress on Next Generation EU ratification I think is highly unlikely this year, maybe summer 2021.

All in all expecting more US/Europe selloff before election until focus turns more on stimulus again

To come back to the dailyfx piece - this risk-off scenario would be somewhat bullish for USD - until China and others start fearing USD hyper-inflation (improbable).  

highly interested in counter arguments

Edited by HMB
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