The ECB could go further. Fundamental analysis for 21.10.2014
21.10.2014
The purchase of assets, which was started yesterday by the ECB is raising more and more questions. Earlier, Mario Draghi said that the regulator can increase its balance by €1 trillion, but the current conditions of the program are unlikely to allow it to do so. The fact that the volume of mortgage bonds, which satisfies the requirements of the ECB in terms of reliability, does not exceed € 600 billion, and securitized assets are even less - only € 400 billion.
It is unlikely that the ECB will buy up all the papers on the market because then there will be no market. Therefore, it is necessary to expand the parameters of the program. As in the foreseeable future due to the position of Germany purchases of government bonds are hardly possible, the ECB may well turn their attention to corporate bonds, publicly traded on the secondary market, which would enhance the effectiveness of the program as a whole.
According to sources in Reuters, the question is already actively being solved, and officially the expansion of asset purchases will be announced at the December meeting of the Board of Governors. However, here the ECB, was faced with increased pressure from Berlin, where even the last and in fact forced actions of the regulator have caused a storm of criticism, especially after Draghi's remarks about the need to increase investment spending.
If the ECB did go for this step, the European version of quantitative easing can already be considered valid. Against this background, the quotes of European indices went up, almost repeating the American scenario. Accordingly, such rumours can serve as a basis for a further reduction in the Eurodollar, especially in the face of strong statistics across the United States, which increases the chances of a rate hike by the Fed in the first quarter of 2015.
Moreover, if the Fed regularly publishes predictions about the future of their rate, in which it is clear that in the next year, rates will rise, the ECB is not ready yet for such openness, even with plans for the publication of minutes of meetings. It is the "open date" of the pending stimulus from the ECB, which will be the main driver to further reduce the Eurodollar in the coming months.
No important statistics were planned for Tuesday. The only factor in the movement of the pair was the rumours about the possible expansion of the list of assets in the program of purchases by the ECB. The environment is also expected to be on the "boring" side in terms of macro-statistics, as we will see only the data for the American inflation. Consequently, until Thursday, when the data will be published on the European PMI, it is unlikely that we will see any sort of a sharp drop in the pair.
RoboForex Analytical Department
It is unlikely that the ECB will buy up all the papers on the market because then there will be no market. Therefore, it is necessary to expand the parameters of the program. As in the foreseeable future due to the position of Germany purchases of government bonds are hardly possible, the ECB may well turn their attention to corporate bonds, publicly traded on the secondary market, which would enhance the effectiveness of the program as a whole.
According to sources in Reuters, the question is already actively being solved, and officially the expansion of asset purchases will be announced at the December meeting of the Board of Governors. However, here the ECB, was faced with increased pressure from Berlin, where even the last and in fact forced actions of the regulator have caused a storm of criticism, especially after Draghi's remarks about the need to increase investment spending.
If the ECB did go for this step, the European version of quantitative easing can already be considered valid. Against this background, the quotes of European indices went up, almost repeating the American scenario. Accordingly, such rumours can serve as a basis for a further reduction in the Eurodollar, especially in the face of strong statistics across the United States, which increases the chances of a rate hike by the Fed in the first quarter of 2015.
Moreover, if the Fed regularly publishes predictions about the future of their rate, in which it is clear that in the next year, rates will rise, the ECB is not ready yet for such openness, even with plans for the publication of minutes of meetings. It is the "open date" of the pending stimulus from the ECB, which will be the main driver to further reduce the Eurodollar in the coming months.
No important statistics were planned for Tuesday. The only factor in the movement of the pair was the rumours about the possible expansion of the list of assets in the program of purchases by the ECB. The environment is also expected to be on the "boring" side in terms of macro-statistics, as we will see only the data for the American inflation. Consequently, until Thursday, when the data will be published on the European PMI, it is unlikely that we will see any sort of a sharp drop in the pair.
RoboForex Analytical Department
Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.