The European Central Bank is considering expanding its buying program to corporate bonds. Doing this would allow them to significantly expand their balance sheet, thus printing more euros.
And the euro responds: EUR/USD is down around 50 pips, losing the high range and finding lower support.
Update: a new report says the topic of corporate bond buys is NOT on the agenda.
The report says that ECB could decide on this in its December meeting and began acting in the first quarter of 2015, buying bonds in the secondary markets: not at auctions.
Buying corporate bonds would in theory encourage more firms to borrow money in the markets and potentially put this money to use in investment, thus stirring the European economies and potentially pushing inflation higher.
However, there are issues here: how would the ECB decide which bonds to buy? Would it help only the biggest corporations? This would be politically problematic.
EUR/USD lost the 1.28 to 1.2850 range and is now one range lower, trading at 1.2765 at the time of writing.
1.2750 was the old double bottom and is now only weak support. Further support is at 1.27 and really strong support awaits at 1.2660.
Opinions on EUR/USD:
- Sell EUR/USD On Failure To Break 1.29 – SocGen
- EUR/USD in a triangle – Elliott Wave Analysis
- EUR/USD: We Went Long Targeting 1.31; Position For A Bounce – Credit Agricole
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