June 18,  5:00 pm EST

We’ve talked about the prospects of the Fed surprising tomorrow.

Maybe beating the Fed to the punch, we had a surprise this morning–from Europe. In a prepared speech at an ECB forum today, Mario Draghi telegraphed more monetary stimulus to come and maybe soon. Cutting rates would take euro zone rates into negative territory. They could also restart QE–adding to an already $3 trillion worth of assets they purchased between 2015 and 2018.

That news sent stocks and commodities higher this morning, and global rates lower.

But keep in mind, a powerful tool used by the key central banks in the world over much of the past decade has been tough talk. It has been especially effective for the ECB. Draghi fought off a speculative attack on the vulnerable European soveriegn debt market in 2012 by promising to do “whatever it takes.” That was a specific threat to buy unlimited Spanish and Italian government bonds to crush the speculators that had run rates up to unsustainable levels. The threat worked and government bond yields in Italy and Spain fell sharply, avoiding what looked like a cascade of debt defaults in Europe. He didn’t have to buy a single bond, until 2015, when the ECB was ultimately forced to follow the Fed and BOJ with QE.

What about this time? Is it talk or is the ECB ready for more action?

Probably the latter, especially given the likelihood that the Fed has ended its tightening cycle and has prepared markets for a rate cut.

Still, the news from the ECB today makes it clear that the two major central banks (the Fed and the ECB) are now focused on creating tailwinds for their respective economies (again) rather than creating headwinds. And this positioning is all dependent upon the direction Trump’s trade war with China takes.

On that note, Trump announced this morning that talks with China are back on. That’s good news for markets. The question is, is Trump ready to do a deal? Has the interest rate market already given Trump the rate cut he has wanted? We go into the Fed meeting tomorrow with the 10-year yield trading almost 125 basis points lower than it was in just November of last year. And the last move the Fed made was a hike.