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Easing expectations of QE from ECB and BoJ - Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 21, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Richard Franulovich, Research Analyst at Westpac, suggests that market focus is currently on the prospects of expanded QE programs from both the ECB (meetings 22 October & 3 December) and the BoJ (30 October considered a likely announcement date).

    Key Quotes

    “Comments from ECB Governing Council members Coeure and Mersch and board member Nowotny suggest a consensus is not yet in place for more easing as soon as this week, either in the form of a cut in deposit rates or an expansion of the size or duration of the QE program.”

    “Wait and see appears to be the main theme, even as one could argue the risks to Eurozone growth and inflation from the EM slowdown may already be materialising. Very soft German IP, exports and factory orders data in August and a renewed slump in inflation in September certainly warn as much. But, with ECB officials talking down the chances of near term easing the focus has shifted to the ECB’s 3 Dec meeting. That meeting will be accompanied by fresh staff projections, often a trigger for fresh policy action by the ECB, not to mention other central banks.”

    “The complication at the December ECB meeting is the sharp fall in energy prices late last year will begin to fall out of inflation calculations, lifting annual rates sharply and toward the ECB’s target. With that in mind, the best guess is that the ECB keeps policy steady both this week and in December, but maintains a strong dovish bias and possibly adopts more aggressive rhetoric to check EUR appreciation potential.”
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