ECB to drain cash in offset to new yield-capping scheme – Reuters

Dhwani Mehta FXStreet

The European Central Bank (ECB) is said to bring back 'sterilization' in the fight against fragmentation, as a new scheme at its July policy meeting, Reuters reports, citing two sources familiar with the matter.

Key takeaways

The ECB will likely drain cash from the banking system to offset any bond purchases made to cap borrowing costs for indebted euro zone states.

The ECB could hold auctions so banks can park cash at the central bank for a more favorable interest rate, which may up to the refinancing operation rate.

Market reaction

EUR/USD is unfazed by the above report, currently trading at 1.0574, down 0.09% so far.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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