Bank of America FX strategist Athanasios Vamvakidis is out with a new note titled Wishful Thinking Supports EUR.Read the rest here.
He argues that investors are over-optimistic about what the ECB will do to protect the euro, and that they're projecting their wishes and wants onto what Mario Draghi has actually said, which in Vamvakidis' view is not very much.
In Vamvakidis' view, here's what Draghi said at his last meeting:
ECB interventions will be conditional on countries making requests for EFSF/ESM help.
Furthermore, the ECB intervention is not unlimited.
The ECB still does not know how it's going to deal with the matter of ECB bond holdings being senior to private creditors.
The ECB will not give a banking license to the ESM.
Then according to Vamvakidis, this is what the markets heard:
The ECB will give up its seniority.
Countries will come in with unlimited firepower.
This big aid offer will encourage Spain and Italy to ask for aid.
So there's a big gap in what Draghi said and what the reality is.
Tuesday, August 14, 2012
BofA: Markets Involved in Wishful Thinking on ECB Actions
Gold-hater Joe Weisenthal has the scoop on a research note out of Bank America: