The last but two

Well, yesterday's ECB meeting proved to be more Titus Andronicus than Hamlet or Romeo and Juliet, with Draghi performing his usual trick of doing nothing but promising reaallllyyyyy hard to do something really quite impressive if the governing council makes up its mind.

To be fair, opening the possibility of purchasing a broad range of assets could be quite powerful; of course, even if the ECB were "only" to do standard sovereign QE, they would be purchasing a much broader range of assets than the Fed, BOE, or BOJ.  After all, didn't the entire Eurocrisis revolve around the fact that a BTP (or Bono, or GGB, or OAT, etc.) is a completely different animal from a Bund?

Of course, a number of questions remain.   Perhaps the thorniest is what exactly QE in Europe could hope to accomplish.   Draghi trotted out the usual song and dance about lowering risk premia, the portfolio channel effect, etc. etc.  Certainly it seems difficult to credit that the level of sovereign yields is proving an impediment to growth, given that they're at record lows across vast swathes of the Eurozone, erstwhile crisis countries included.

The portfolio channel effect could prove to be a more effective one, but then again, there are reasons to expect it to work less well than in other countries.   The fragmented nature of Eurozone asset markets across national borders make it less likely, it would seem, that certain assets would be seen as acceptable substitutes than in other countries.   If the ECB buys Bunds, are the holders really going to run out and purchase shares in Santander or Intesa?  It seems dubious.  Credit easing is what's really needed, but alas that's much easier said than done.

Draghi's anchoring on the oil price was also curious, insofar as there would appear little that the ECB could do to alter the trajectory of crude;  the prior president of the ECB, a certain M. Trichet, demonstrated how foolhardy it is to chase the in- or de-flationary will-o-the-wisps caused by the oil market.  In this case, perhaps Mario was simply using energy prices to add a little zest to his warnings over lover prices; from Macro Man's perch, however, it weakened rather than strengthened his credibility.

For the time being, market focus may shift back to the dollar side of the equation and the US, what with payrolls and what not today.  Macro Man's model remains relatively upbeat, looking for an out-turn of  257k; he would note, however, that it has tended to be somewhat over-optimistic for the last few months.

With USD/JPY at its highest level since the financial world went 'bang', there must be at least an amber light of caution that a lot of good news is in the price.  Not to beat the same old tired drum, but there looks to be a lot less priced in to EDZ5 than USD/JPY; as such, in his personal trading, Macro Man has kept his option structures in the former while taking profits in the latter this week.

Macro Man cannot help but recall that last December's payroll was a strong one, keying a higher dollar and yields while allowing equities to keep rocking.  Virtually the entire street is probably hoping for a repeat, though much more on the dollar axis than rates these days.

Insofar as the year is drawing swiftly to a close, punters will likely have relatively little tolerance for a drawdown in the event of adverse data.  All the more reason to follow the road less traveled and keep the rates trades rather than the dollar for the time being.

After all, today's figure is the last really important release of the year but two (assuming the Japanese election is a foregone conclusion); other than this, we've got the second TLTRO tender and the Fed, after which the entire macro industry will probably heave a whopping sigh and look forward to the holidays.

Who knows?   If today's number doesn't play ball, that process might start a bit early.