ECB: The big bang

Carsten Brzeski ING Economic and Financial Analysis

Mario Draghi delivers his final "whatever it takes" with a big package of monetary stimulus.

The final showdown has started with a big bang. The ECB just announced a big policy package to revive the Eurozone economy and to bring inflation back to target. Here is what the ECB will do:

Deposit rate cut by 10 basis point to -0.5%.
A tiering system will be introduced.
Forward guidance on rates is no longer calendar based but open-ended and state-dependent.
QE will be restarted with 20bn euro per month, starting 1 November. There is no end date added to QE.
The TLTROs will be repriced and include an incentive for banks to increase lending. Along the lines of the first two generations of TLTROs, banks which exceed the benchmark ECB loans will be charged at the deposit rate.

This is Mario Draghi’s final “whatever it takes”. Depsite all market excitement now, the question remains whether this will be enough to get growth and inflation back on track as the real elephant in the room is fiscal policy. It is clear that without fiscal stimulus, Draghi’s final stunt will not necessarily lead to a happy end.

At 2.30pm CET, ECB president Mario Draghi will elaborate on the decisions and might add some details. He might also add some flavour on the discussion and how he convinced the hawks. Get out the popcorn and cold drinks and stay tuned.

Read the original article: ECB: The big bang

Author

Carsten Brzeski

ING Economic and Financial Analysis

Carsten Brzeski is Chief Economist in Germany. He covers economic and political developments in Germany and the Eurozone, including the monetary policy of the ECB.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.