The bulls run on equity markets took another shot in the arm yesterday as major markets all pushed strongly higher. Wall Street continues to push into new high ground, however it was the breakout on the DAX above 10,827 which was a multi month resistance that caught the eye. This comes with the euro remaining firm just before the ECB is expected to extend its QE program by at least six months at the meeting of the governing council today. However, the interest in the press conference will be whether the ECB is at the same time also beginning to prepare for the tapering of the QE program. This would be the surprise for the market and it is interesting to see the euro having started to push higher in the run up to the meeting. Last December the ECB disappointed the market by not extending easing, something that caused a huge rally on the euro. Could we be in line for a similar disappointment? It is also worth noting that the rally in Treasury yields is consolidating and possibly beginning to roll over. This is helping to pull the US dollar lower with the trade weighted dollar index looking corrective now. If the ECB disappoints, the dollar could go into reverse mode at least for the near term.
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