Hi, last week was shortened by Friday's holiday. And also trading volume was very light. Stock market indexes managed bearish development last week. Especially Dow Jones looks very weak now..

Today I would like to share some my thoughts about European central bank and its strategies.

ECB did nothing with interest rates last week . But it quietly pumped above 400 billions of EUR into European banking system. The biggest liquidity printing ever

ECB is playing very strange game. Publicly is announcing fight against inflation and telling that it will not be printing money as these “bad Anglo-Saxon” central banks (BOE and FED)

On the other hand ECB quietly, without public interest, is pumping a lot of money (billions of EUR) into European banks. And these banks will use these money to buy  debt of EU countries.  It is printing press in action much bigger then FED and BOE do. 

ECB balance sheet is already twice as big as FEDs one. ECB is doing quantitative easing , not directly but through commercial bank system.

This is telling me some points: that EU bank situation is much worse then it looks like. That EU sovereign debt situation in on verge of collapse. I have heard that without this buying , some EU countries should default on their debt immediately.

And EUR is so strong to USD and other currencies. Very strange situation.

I think that Europe is heading into huge storm, economic and political. Everybody has to prepare for big waves.

For my fund I am already shorting European equities and looking for good short entry in EUR and CEE currencies.

Happy trading, 

Richard

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