It appears that markets are choosing to reassess their initial reaction to yesterday's ECB decisions and decided that things are not so bad after all. A few perceived 'red lines' of previous quarters may have been breached by some of the majors, despite the one reservation, which was pretty obvious to all, but now the details are in the implementation. Regardless of how investors feel about the ECB at this stage, with the benefit of hindsight perhaps it is wise never to expect too much as even central bankers know that there are some aspects of crisis resolution which are beyond their control – be it trying to accelerate a recovery in the US or pushing for structural changes in the Eurozone. Within their restricted remits though, both the Fed and ECB will need to push the boundaries, but Bernanke and Draghi both know things must happen in the right order and under the right conditions.
According to Geoffrey Yu, a Research Analyst at UBS, “Whether the Bundesbank's clear objections delayed the Governing Council's ability to push things forward with haste, or the collective Council did not want to remove incentives for reform that delayed a more full-on response is unclear, the waiting game must continue, and to their credit, the ECB may yet have done enough to deter new downside trades.”