• 36 mins UK Credit Card Interest Rates Are Skyrocketing
  • 18 hours From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 23 hours Are Smart TVs Spying On Us?
  • 1 day Is Fossil Fuel Divestment A Waste Of Time?
  • 2 days A Russian Billionaire’s Space Quest To Save Humanity
  • 2 days Markets Take Breather As Consolidation Continues
  • 2 days Economic Woes Weigh On Copper Prices
  • 2 days World's Largest IPO At Risk Following Drone Strikes
  • 3 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 3 days What’s Behind The Silver Sell-Off?
  • 3 days The Retail Apocalypse Is Accelerating
  • 3 days The Top Tech Stocks Of The Year
  • 4 days America’s Workforce Elderly Workforce To Double By 2028
  • 4 days Toyota Tests Solar-Powered Prius
  • 5 days Why The Gold Rally Flatlined
  • 5 days The Uranium Sector Can’t Catch A Break
  • 6 days Upcoming Fed Meeting Has Investors On Edge
  • 6 days Global Gold Sector Outlines Responsible Mining Principles
  • 7 days China’s Giant Vampire Fund Loses $120B
  • 7 days McDonalds To Roll Out Robot Drive-Thru Clerks
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Ashraf Laidi

Ashraf Laidi

AshrafLaidi.com

Ashraf Laidi is the author of "Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets" - Wiley Trading.

Contact Author

  1. Home
  2. Markets
  3. Other

ECB Preempts Fed Inaction, PBOC Action

The ECB succeeded in weakening the euro and bund yields with an aggressive downgrade of 2015-2017 forecasts for GDP and CPI, while announcing an increase in the issue share limit of bonds included in QE purchases to 33% from 25%. The increased limit means the ECB can buy a higher share of an individual nation's bond issue, giving it more freedom of concentration in particular issues.

ECB Preempts Fed Inaction, PBOC Action - Yellendraghi

CPI forecast for 2015 was downgraded to 0.1% from a previous 0.3% reading, while 2016 CPI was revised to 1.1% from 1.5%. GDP forecasts for 2015 and 2016 were also downgraded to 1.4% from 1.5% and 1.7% from 1.9% respectively.

The ECB's decision to deepen (not broaden) the purchase of individual issues does not imply an increase in the size of QE but allows it more flexibility in producing results from current level of purchases. Although Draghi asserted there was no discussion on increasing QE size and cutting interest rates, the possibility for more stimulus cannot be ruled out before year-end --another reference to "We'll do what it takes".


Draghi's pre-Fed Inaction

On a day when Eurozone composite PMIs (combining services and manufacturing)hit a 4-year high, Draghi aggressive downgrade is widelydesigned to cushion the impact of potentially euro-boosting events such as aFed decision hold rates unchanged later this month, further PBOC easing and freshCNY devaluation. All of these factors are seen as euro-positive, which wouldfurther complicate the ECB's task to achieve price stability at a time of prolongedenergy prices.

The question on EURUSD implications remains that of relative interest rate differentials as much as it is about the reality of capital flows and further unwinding of euro-carry trades from unavoidable CNY weakness, once China's president returns home from G20 tour.

 

Back to homepage

Leave a comment

Leave a comment