ECB's 'Promises' Leave Investors Cold

Today's inaction by the European Central Bank was doubly disappointing because it had built up expectations.

If you're reading this, you're probably not at the Olympics - but you can be forgiven for thinking you're watching some kind of game.

The euro lifted all the way to the 1.2400 area ahead of European Central Bank President Mario Draghi's press conference today and when he announced no new rescue measure for the euro zone, the common currency tanked.

"I think the degree of the market selloff today is largely a function of disappointing expectations. Draghi’s strong rhetoric – “whatever it takes” – led investors to believe they would get a “big bang” solution or at least set of measures today," says Rebecca Patterson, chief investment officer at Bessemer Trust. "When instead we got some promises and nothing else, investors who had positioned on expectations got out quickly," she told me.

Patterson does believe the ECB is biased toward providing some stimulus. However, she says, "it’s not clear to me the ECB will have all the t’s crossed and i’s dotted by the early September meeting to do something big and bold."

The push and pull of expectations means more volatility is ahead, she says, but the actual upside and downside may be limited.

"I continue to believe in selling the euro on rallies, and being extremely selective regarding European assets," Patterson told me.

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