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ECB: Draghi pointed towards fresh stimulus - Swissquote

FXStreet (Delhi) – Yann Quelenn, Market Analyst at Swissquote, notes that at yesterday’s ECB meeting, President Draghi appeared worried and stated that some more time was needed to appraise the risks which would trigger an increase in the current quantitative easing program.

Key Quotes

“This is the second time of late that Draghi has hinted about the possibility of monetary easing being stepped up. Of course it is not the current recession and the global Eurozone labour market that keep Mario Draghi awake, but rather the lingering low oil prices and the recent turmoil in the global markets.”

“These outside conditions have the potential of increasing downside pressure to both Eurozone inflation and growth. This would provoke an expansion of the asset programme.”

“The inflation and growth forecasts have already been lowered this month as the odds increase of an official announcement of a QE increase.”

“However, the ECB remains very optimistic about the future success of Quantitative Easing as was the case with U.S. and Japan. Many European countries have massive debt-to-GDP ratio whose debt, in most cases is unsustainable. Before being able to grow, reimbursing the debt should be the first priority. We anticipate the EURUSD to weaken in the medium term as markets are still expecting a Fed rate hike. 1.1000 represents a decent target.”

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