This Week’s ECJ Meeting Paves The Way for ECB’s QE Program

This Week’s ECJ Meeting Paves The Way for ECB’s QE Program
January 15, 2015

The financial industry was looking today, at what may be one of the most important decisions for financial markets for some time to come; The ECJ (European Court Of Justice) was due to rule over the validity of the OMT (Outright Monetary Transactions) the ECB (European Central Bank) planned years ago when Spanish and Italian yields were at their highs.

The verdict today, while not a binding one, gives a green light to the European Central Bank to do whatever it needs for fulfilling its mandate. This may seem trivial, however this decision paves the way for a QE (Quantitative Easing) program in Europe, as there is nothing in the way of the ECB now but Germany.

It is simply unlikely that the central banks of the world are wrong (US, Japan, UK, Canada, etc), and only Germany is right. Not even Germany can argue against sovereign bond buying because, of all the central banks in developed economies, only the Reserve Bank of New Zealand and the European Central Bank have tightening monetary policies.

While for the RBNZ (Reserve Bank Of New Zealand) this may be “normal”, (as the interest rate in that country is well above 3%). The ECB is the central bank in need of easing but the only one that has that lower inflation (actually we might say deflation) and this is still tightening.

That being said, now that the ECB has green light for easing aggressively, we should expect this to be mentioned next week at the first Governing Council meeting for 2015.

The EURUSD fell sharply today after the ECJ ruled, as market participants figured out all that is mentioned above. Hours later, the disappointing figures from Retail Sales in the United States were announced and this brought the pair back above 1.18.

 

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Moving forward, traders can expect a lower EURUSD until the ECB press conference next week. We advice only looking to buy below 1.1747, as this is the level the EURUSD was introduced with in January 1999 and therefore it should attract price.

An all important January is still ahead of us. Open a trading account with one of our tested and approved Binary Options or Forex brokers and get ready for 2015.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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