First, a broad strokes preview of what the world’s most confused Central bank will do this week:
[The ECB] is trapped down a dark alley and they will bite. For all the pros and cons of public QE as well as the hows and whens, at the end of the day the market has pushed the ECB into that corner. Within the context of the practical limitations of QE, we have no doubt that Draghi once again will leave a warm fuzzy feeling that they are prepared to do all that it takes. Of course, like OMT, it probably doesn’t mean they are buying BTPs come February 1st, but that doesn’t matter for BTPs. It also doesn’t matter for the Euro zone outlook given the dubitancy of QE efficacy.