The ECB has finally decided. Overview for 10.03.2016
10.03.2016
The Eurodollar is falling in response to soft monetary policy of the European regulator, but looks more stable than it could.
The ECB has decided to decrease the interest rate during its March meeting. Starting March 16th this year, it will be 0%, as it was decreased from 0.05%. At the same time, the decision was made to decrease the deposit rate from -0.3% to -0.4%. In addition to that, the motivation program QE will be expanded starting April, its volume will be 80 billion Euros monthly against the current number of 60 billion.
But there is more. It looks like Draghi and his team are perfectly prepared to reboot the Eurozone economy and use all available fiscal tools for this purpose. LTRO II system will start operating in July 2016; it is intended for 4 years. LTRO II is not QE, all risks are on the banks and financial organizations, but after the program is launched, “new money” will be created, and this is good for capital markets. Banks will be able to count practically on any amount of funds borrowed from the ECB. The first LTRO program finished in spring 2014.
In general, this looks like an impact to beat all “weak” spots at once. This time the ECB really took care about a long-term perspective and, on top of that, established the basis for weakening of the Euro, because the currency isn’t likely to grow progressively under ultra-soft fiscal conditions. All birds were killed with one stone.
In the long-term perspective, all measures taken today are without any doubts very positive for the Eurozone economy. There is a certain risk, because the spread between the rates of the ECB and FRS is now even bigger, but it looks like the market was prepared for it.
At some moment, the Euro fell, but then recovered losses quite fast.
RoboForex Analytical Department
The ECB has decided to decrease the interest rate during its March meeting. Starting March 16th this year, it will be 0%, as it was decreased from 0.05%. At the same time, the decision was made to decrease the deposit rate from -0.3% to -0.4%. In addition to that, the motivation program QE will be expanded starting April, its volume will be 80 billion Euros monthly against the current number of 60 billion.
But there is more. It looks like Draghi and his team are perfectly prepared to reboot the Eurozone economy and use all available fiscal tools for this purpose. LTRO II system will start operating in July 2016; it is intended for 4 years. LTRO II is not QE, all risks are on the banks and financial organizations, but after the program is launched, “new money” will be created, and this is good for capital markets. Banks will be able to count practically on any amount of funds borrowed from the ECB. The first LTRO program finished in spring 2014.
In general, this looks like an impact to beat all “weak” spots at once. This time the ECB really took care about a long-term perspective and, on top of that, established the basis for weakening of the Euro, because the currency isn’t likely to grow progressively under ultra-soft fiscal conditions. All birds were killed with one stone.
In the long-term perspective, all measures taken today are without any doubts very positive for the Eurozone economy. There is a certain risk, because the spread between the rates of the ECB and FRS is now even bigger, but it looks like the market was prepared for it.
At some moment, the Euro fell, but then recovered losses quite fast.
RoboForex Analytical Department
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.