The US dollar was marked down in response to the French election and saw some follow through selling yesterday, but the momentum had slowed, and now it is stalled. The greenback is posting upticks against nearly all the major currencies.  

There is a good reason to be cautious. We have mentioned it before, but think it is important that speculator in the futures market had a record gross long euro position, according to Bloomberg data. The dollar overhang that may have helped cap it at the start of the year is no longer the case.  

Many observers have bought the line from the hawks that the ECB can change its stance shortly. Recall, some German and Austrian officials have floated the idea of a rate hike before the end of the asset purchases; a different sequence than the Federal Reserve. Draghi and others pushed back, though it was not until the March core CPI came out at 0.7%, after bottoming in 2015 at 0.6% that the hawks had been silenced.  

Yesterday, “ECB sources,” said played up the possibility of a change in June. These sources have their own axe to grind. Who are such sources? It would not be Draghi or his allies. It would most likely be the hawks, who have resisted the unorthodox measures at nearly every step in the process. At the BOJ and Federal Reserve, we have noted that the power of appointment rather than a direct challenge to the independence of the central bank is how the elected officials will influence the monetary policy. There is no such mechanism at the ECB.  

By citing the June meeting days before the April meeting would seem to suggest that the “sources” recognize that they have little chance of resisting Draghi now. Indeed, we suspect the risk is that Draghi is more dovish than the euro longs expect. Macron’s entry to the second round of the French election, and the likelihood that he wins removes some downside political risk, but it does nothing about the lack of traction in prices.