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The European Central Bank Delivered...Really

European Central Bank
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European Central Bank

The European Central Bank offered key concessions on Thursday, this strategist says.

Don't look now, but European Central Bank (explain this) President Mario Draghi actually delivered in his Thursday speech.

True, he didn't offer a "whatever it takes" solution to the euro zone crisis, despite his vows a week earlier. But Jens Nordvig, global head of G10 FX strategy at Nomura Securities, says he put more on the table than investors realize.

"First, the ECB stated that the subordination issue would be addressed, with the aim of reducing negative side effect of bond market purchases," Nordvig wrote in a note to clients. "Second, the ECB has committed to support the short end of government bond markets, albeit with various conditionality."

Translation: the ECB will reduce the uncertainty that can result about who gets paid back first if a government entity starts buying bonds of troubled countries, and it will support short-term government debt if certain conditions are met.

No, these aren't game changing concessions. But Nordvig, a longtime euro bear, says they are still meaningful. "The risk of an uncontrolled selloff in Spain and Italy, such as that in motion just two weeks ago, has been meaningfully reduced."

Given Draghi's comments, and the better than expected U.S. nonfarm payroll report, Draghi is closing out some of his more bearish trading positions. He says he doesn't expect smooth sailing ahead, but still, "one specific tail risk has been eliminated."

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