Pay attention to Draghi and Yellen’s talk

There has been lots of talk from central bankers yesterday and even more today. Usually, these speeches are quite boring but every once in a while, they throw us a curveball.

President of the European Central Bank, Mario Draghi started some tidal waves yesterday morning by making a simple yet far-reaching statement: “The threat of deflation is gone and reflationary forces are at play”.

Deflation has been a major issue around the globe for the past few years. Businesses and bankers like it when money loses its value over time. They enjoy most when the rate of inflation is just under 2%, so when money is gaining in value like it has been lately, this is a real “threat” that needs to be dealt with. Their way of dealing with it is by printing more and more money until supply and demand start to drag down the value.So Mario’s statement above was taken by the markets to mean that the ECB may actually start to slow down their monthly printing regime. The Euro really took off.

Later that day, in the United States, Draghi’s counterpart Janet Yellen followed up with an even stronger statement: “I don’t see a financial crisis occurring in our lifetimes”. Please excuse me for taking that statement with a truckload of salt. It’s not just me though; stocks around the globe, especially in the tech sector, along with the US Dollar are taking some major hits. The Nasdaq 100 fell 1.6% and most major indices around the world are talking losses of more than 0.5% over the past 24 hours.

US Dollar index is currently free falling… With the US Dollar (and the Japanese Yen) dropping like a stone it’s even making bitcoin look that much more stable. Of course, we always need to remember that cryptocurrencies are an incredibly high risk asset but for those of you who are currently waiting for a dip to buy in at, please pay attention. The same applies to Ethereum. I have no idea where this is going in the long term or where it will settle. As far as short term trading goes, with small amounts and understanding the risk factor, there’s a lot of gains that can be made by playing the short term direction, if you can read the momentum of the market.

Mati Greenspan – market analyst – eToro