We have a potential victory for those who thought the market had over-reacted to comments made yesterday by Mario Draghi.
The euro shot higher yesterday, and kept going today, after the ECB chief showed a growing focus on reflation, potentially setting the central bank up for starting to think about withdrawing monetary stimulus.
As some observers pointed out, this was a one-sided interpretation; Mr Draghi was also careful to stress that any pullback needed to be done with “prudence”.
Now, Bloomberg is reporting that the central bank thinks the market “has misjudged” his statement.
This has knocked the froth off the euro, which is now down on the day at $1.1320.
Sovereign bonds also reversed course. Yields on Germany’s benchmark 10-year Bunds, which rise when prices fall, increased by 12.5 basis points (0.125 percentage points) on Tuesday, and had been holding steady on Wednesday. However, they dropped immediately after Bloomberg’s report was published, and at publication time were down 3.5bps.