European stocks and the Euro are rising ahead of the crucial ECB meeting, which will be held at 12:30 GMT. Investors hope that it will result in a confirmation of the central bank's plan of realizing unlimited sterilized bond purchases of distressed Eurozone countries such as Spain or Italy, with the aim of reducing their borrowing costs. The plan was leaked yesterday to the media and despite the fact that Angela Merkel reiterated her opposition towards unlimited bond-buying, the expectations for it to be implemented are high.
According to Jane Foley, Senior Currency Strategist at Rabobank: “The ECB is apparently ready to waive its creditor status, there will be no targets for interest rates or potential limits on the quantity of bonds that could be bought . Also, it has been reported that sterilisation of bond purchases is an option rather than a must, though there are differing reports on this matter and for sure the BBK will be pressing for sterilisation given its concerns about the ECB directly finding EZ states.”
“On the issue of a refi rate cut, there has apparently been no time to discuss the matter. This strengthens our view that in a month in which the ECB may revise higher its inflation forecasts an interest rate cut will be delayed, potentially until next month,” the expert adds.
Meanwhile, Angela Merkel will visit Madrid today to meet Mariano Rajoy and take part in a entrepreneurial summit, which will be opened by the Spanish Economy Minister Luis de Guindos. The markets will follow the meeting closely, as it is expected that the Spanish and German leaders will discuss topics such as further bailout for Spain and conditions under which it could be carried out.