- News & Education
The European Central Bank (ECB) engaged into a €2 trillion bond buying program to promote economic growth and drive inflation up in the Eurozone.
It involves buying assets from commercial banks to inject more funds in the banking system. It is a non-standard monetary policy commonly referred as quantitative easing (QE).
The market expected the QE to be phased out by the end of this year. Key ECB policymakers are expressing concerns over a strong Euro which is putting months of challenging work into jeopardy.
A strong Euro will directly hurt Germany, one of the largest economy in the Eurozone, as higher export costs will translate into lower demand. On the other hand, the Pound will eventually benefit from it as euro buyers could switch to pound.
The exchange rate has therefore become an issue as ECB is unable to maintain the desired inflation rate. Given the concerns over the strong euro, the market foresees that ECB is less likely to exit from the QE phase.
After more than 2-year high, the EURUSD dropped. The selloff was also due to strong economic US data during the week and the comeback of the tax reforms talks in the White House.
The ECB Monetary policy statement and press conference is scheduled on the 7th of September 2017. It will be a key event for the Euro.
By: Deepta Bolaky
Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.