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- ECB is preparing to submit the QE 2018 data on Thursday
ECB is preparing to submit the QE 2018 data on Thursday
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Loading...The most significant event for investors this week is Mario Draghi's speech on Thursday, where we are expected to receive information on the reduction of monetary stimuli in the eurozone. The big question is how much the ECB will reduce the Quantitative Easing program. Market participants expect the incentives to be halved by €60bn. month to €30 billion as of January 2018. until September 2018. Part of the forecasts are also rumors that the ECB may cut purchases to €25bn. by the end of 2018, but this is stay unlikely.
After this period, the bank will most likely not commit to figures, but will take the view that monetary policy will be driven by economic data coming from the eurozone.
Increasing interest rates will be a difficult task for the ECB as inflation is still below the desired 2%. The ECB signaled early this year that eurozone interest rates will remain low even after the quantitative easing program has been completely discontinued.
How will this affect the EUR and European indices?
With cuts in purchases, we expect a strong EUR growth, as the ECB will reduce liquidity infusion through purchases of government and corporate bonds. In other words, the ECB will start selling state and corporate bonds it currently buys to banks, thus withdrawing a large EUR amount from the market.
The stock market is expected to experience difficulties as companies issuing corporate bonds will have to pay higher interest rates on the securities the ECB will sell to banks. The same applies to governments, with increased interest on government bonds increasing costs. What remains is how they will be able to cope with the end of "cheap money".
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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