Jean-Claude Trichet’s press conference after the rate decision holds high hopes – according to a hint he made and comments from several market officials, he might introduce a massive quantitative easing program – buying bonds of peripherals Euro-zone countries in hundreds of billions of Euros and lowering their yields. Lower yields will ease the markets and allow for these countries to pursue further bond auctions. There will be no new credit crunch in Europe, and no more bailouts will be necessary as there will be high liquidity. The Euro will jump up…Well, not so fast.
Up to now, the ECB has been on the sidelines of the European debt crisis. Their “unconventional steps”, loans to banks, where quite limited, and helped only a little bit. So, we might see some kind of enhancement of these steps and perhaps some bond buying, but no big action like the Federal Reserve did in the US. We won’t see here the trillions that were printed in the US.
As Neil Hume on Alphaville notes, many market analysts doubt such a big move by the ECB, and this will trigger the opposite. They quote Marc Ostwald of Monument Securities:
As such the risk of disappointment at today’s events and pronouncements looks to be writ in rather large neon-sign style lettering.
The rate decision is due at 12:45, and the important press conference by Jean-Claude will be held at 13:30, at the same time as the US unemployment claims will be released, the biggest hint towards tomorrow’s Non-Farm Payrolls.
We’ll soon know. High volatility is guaranteed.
EUR/USD is now on the rise, at 1.3187, trading between 1.3114 and 1.32. See more technical levels and analysis in the EUR USD forecast.
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