While the NFL investigates whether the New England Patriots cheated in last weekend’s AFC Championship win by intentionally deflating 11 of 12 footballs, the European Central Bank is also preoccupied with deflation – the monetary kind. In December consumer prices in the Eurozone fell by 0.2% from 12 months earlier. The deflation is a symptom of Europe’s persistent economic weakness. The fact that prices are falling is putting pressure on the ECB to cut interest rates or launch a quantitative easing (QE) program.
Tomorrow Wall Street’s eyes will be on ECB Mario Draghi to see if he’ll announce some sort of initiative to boost money supply in an effort to inflate Europe’s economy. Since an ECB move is widely expected, failure by Draghi & Co. to act (or act enough) could send US stocks lower.
My newsletter’s intermediate-trend timing model for European funds is very close to an intermediate-trend buy signal, but several weeks away from a potential major trend buy signal. Trades are based on Vanguard FTSE Europe (VGK).