“European Cup and ECB change in policy”

We had to postpone our weekly appointment because our Sunday’s thoughts were pointed towards the European cup final. Sometimes photos such as the one below summarizes the overall good momentum of a Country better than any speech.

The ECB changed policy strategy removing “below, but close to” from the definition of price stability. So they expect that overshooting is required to “restore” symmetry in inflation outcomes.

The change of wording is important and it is a clear dovish message for the markets, in particular the European ones. Given tight spreads and equity valuations we expect other volatile days as the one experienced on Thursday (in Europe equity indexes lost more than 2%). Even if news like variant strains undermine investor confidence, liquidity in the system helps “the buy the dip” mentality reversing quickly risk off investors’ mood.