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Market Recap – €20bn per month, open ended

Friday, September 13, 2019 10:50 AM GMT

The “what ever it takes” Draghi announced an “as long as it takes” open ended QE of €20bn net asset purchases per month. Continueing the yesterday’s Market Recap viewpoint, the open ended structure of the QE was returning an infinite number of stimulus (i.e. multipling the €20bn with the length of the program) and sent EUR tumbling. After all, the ECB’s announcement sounded similar to the Bank of Japan’s announcements where QQE is prolonged as long as inflation hits the 2% target in a sustainable manner.

During the press conference, Draghi’s responses made financial markets participants recalculate and discount the magnitude of the QE, sending EUR higher. (i)€20bn per month is close to the net asset purchases at the last months of the previous QE (i.e. not big enough to devalue EUR). (ii) The open-ended decision, was more of a convenient structure that “does not raise the debate of timing”, and certainly not the official Japanification of ECB’s monetary policy. It connects liquidity pumping with inflation. (iii) Draghi communicated the “unanimity of the decision”, but in a turn of his speech, he referred to “significant majority” while he was responding on any raised objections against the beginning of the QE. (iv) “All instruments used”, “well today we did it” was another part of the press conference that could be interpreted that no more easing is expected other than the  present €20bn per month.

At the USA-China front, two goodwill baby steps have been taken from both sides, ahead of their October’s negotiations. Trump will delay the rise of tariffs, as it was announced 2 days ago, and China has purchased 600K metric tones of US soybeans, as it was announced yesterday.

Macro releases: Today the focus turns to the EU trade balance, the US retail sales and the US inflation expectations. Full economic calendar is here.

Disclaimer

The views expressed do not constitute investment or any other advice /recommendation /suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in the report do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade.

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