ECB did surprise market but market surprised more

It would be fair to say that European Central Bank (ECB) succeeded in surprising the market, with big stimulus package it delivered, so the immediate effect was as intended. Bond yields were dropping, Euro was going down, Pan European blue chip index EuroStxx50 was up more than 3.5%. All in all it was looking like a just the day for Bull.

However as press conference went on global reversal began. And by the time press conference ended, Mr. Draghi surely would have been surprised seeing the reactions (if he looked at Bloomberg screen after signing off from the press conference). Euro was up more than 1% for the day and extending gains, bond yields snapped back and by the day end, all European indices and global bourses were in deep red.

So what went wrong?

• Most of the financial media has been blaming Mr. Draghi's communications and his remarks that further stimulus may not be needed and the governing do not anticipate further rate cut. So it is the expectations for future that took toll on the present stimulus.

• Few were pointing to recent BIS warnings that firepower of central banks are going down with each firing, so does their ability to exert impact.

• However, only a handful are pointing to the fact inflation expectations, which we agree with may have a hand over the move along with other mentioned factors.

Euro is currently trading at 1.115 against Dollar.