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Did Government QE in Europe get closer yesterday? – DB

FXStreet (Barcelona) - Analysts at Deutsche Bank view that the government’s QE got a bit closer yesterday after Draghi’s comments to lawmakers.

Key Quotes

“We still think Q1 2015 is the likely announcement time as taboos are being slowly broken down. To recap what Draghi said in his quarterly testimony, he said "Other unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds".”

“He did say monetary policy alone can't bring the economy back on track but it’s clear to us that the ECB are edging closer to action.”

“Markets in Europe certainly appreciated the comments. The Stoxx 600 closed the day +0.48%, although traded as low as -0.8% pre-statement whilst peripheral assets finished stronger with 10yr yields in Spain, Italy and Portugal rallying 1bp, 4bps and 4bps respectively.”

“The ECB’s Mersch was also dovish earlier, suggesting that the central bank could theoretically purchase a range of assets including sovereign debt, gold and ETFs. However his comments were a little more caveated than Draghi’s noting that such a decision must be subject to a cost-benefit analysis.”

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