Matt Weller, CFA, CMT
Faraday Research
It wasn't quite an "empty the clip" decision at ECB President Mario Draghi's penultimate meeting, but the Italian has definitely made a dovish impression.
In its highly-anticipated policy meeting, the European Central Bank made a series of decisions to ease monetary policy and try to stimulate the Eurozone economy:
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Cut deposit rates 10bps from -0.4% to -0.5%
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Introduced a two-tier system for negative interest rates
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Restarted Quantitative Easing at €20B/month effective November 1, with no explicit expiration date
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Announced changes to its Targeted Longer-Term Refinancing Operations (TLTROs)
Many of these changes had already been "priced in" to the market, but the decision around QE is interesting. The €20B monthly pace of purchases was smaller than many analysts had anticipated, but the lack of an explicit termination date makes the announcement more dovish than expected. With inflation subdued, growth stalling and negative interest rates becoming entrenched, is the Eurozone turning into Japan? This is the fear of many traders and explains why the euro has fallen back below 1.10 in the wake of the release.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
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