Friday, August 31, 2012

ECB Said to Get Sole Power Over Banking Licenses in EU Commission Proposal

This story is the only one that matters for the moment.  If this proposal goes thru, then Germany will lose its ability to veto giving the ESM or EFSF or any other entity a banking license.  I imagine this is the real reason this proposal was created in the first place.  This would allow the ECB to print euros with zero constraint.  If this passes, I would hope Germany would simply leave the euro and say "to hell with all of you bastards."

This story is the reason for the EUR to rally 100 pips this morning, ES to rally 10 points, and US Treasuries to selloff 3bps.  I imagine that the next news cycle will be Germany attempting to counter this proposal...and I of course have no idea regarding the legal standing for the ECB to assume this kind of banking license power. 

So, what does Market Profile say?  Well, the mode in ZNU2 is still 134-04+, and Market profile would expect the mode to reign in the market...but with today expected to be a low volume day with Labor Day weekend just ahead, its hard to say.  I would cut all my unit sizes in half for today, just to play it safe.

For what its worth, the stocks vs bond correlation has diverged again, as the month-end cyclical force is keeping treasuries from selling off in lockstep with ES gains.

1 comment:

  1. Thank you for the explanation! That's very helpful and much clearer than anything on TV. Good luck today.