ECB Cuts Rates, Boosts QE & Murders Euro Shorts

ECB Cuts Rates, Boosts QE & Murders Euro Shorts

Read that again. Does the title make any sense? Just how did the ECB murder euro shorts with even more easing?

The ECB has made its move this week. Even lower negative interest rates, more QE, and rhetoric that should all else equal send the euro tumbling to new lows.

But exactly the opposite happened an hour after news hit the wires. Baffled yet? Well, most traders were. The stupendous volatility this single event has brought to the financial markets is difficult to overstate.

Contrary to intuition, the euro (EURUSD) is some 420 pips north of Thursday's lows, making this one of the largest and most brutal intraday reversals we've seen in a long while. Yields on core European sovereign debt are all higher, instead of lower. Such moves make little sense considering how much looser monetary policy is now in the Eurozone. Or does it? Let us explain.