19 Jan 2015
ECB QE program may be larger than market expectations – BTMU
FXStreet (Barcelona) - According to Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, the ECB QE program is expected to be more than the market expectations of EUR500bn but less than EUR 1trn, which might lead to a period of reversal in EUR/USD.
Key Quotes
“The euro is likely to remain under downward pressure at least until the ECB meeting on Thursday with now the only debate being whether the ECB announces a plan that leaves the risk with the national central banks or a plan that results in any future losses being equally shared amongst all euro-zone countries.”
“There is an increasing belief that in order to obtain a wider consensus for a program, the credit risk may well lie with individual central banks.”
“If true, that is likely to open up the ECB to accusations of inconsistency given the initial goal of the ECB through OMT was to reduce the signs of fragmentation within the euro-zone financial markets. Also it seems a bit bizarre for the ECB to announce a monetary policy that would involve instructing central banks to buy certain amounts of government bonds but then refuse any risk associated with the policy.”
“Whatever the outcome on Thursday, we expect a QE program size of something more than EUR 500bn but less than EUR 1trn.”
“The time for half-measures is over and for the euro the size of the program will be the crucial aspect in the days following the announcement.”
“After the SNB last week, the market is probably expecting something more than EUR 500bn, so a figure in or around this total may well prompt a period of EUR/USD reversal after heavy selling of late.”
Key Quotes
“The euro is likely to remain under downward pressure at least until the ECB meeting on Thursday with now the only debate being whether the ECB announces a plan that leaves the risk with the national central banks or a plan that results in any future losses being equally shared amongst all euro-zone countries.”
“There is an increasing belief that in order to obtain a wider consensus for a program, the credit risk may well lie with individual central banks.”
“If true, that is likely to open up the ECB to accusations of inconsistency given the initial goal of the ECB through OMT was to reduce the signs of fragmentation within the euro-zone financial markets. Also it seems a bit bizarre for the ECB to announce a monetary policy that would involve instructing central banks to buy certain amounts of government bonds but then refuse any risk associated with the policy.”
“Whatever the outcome on Thursday, we expect a QE program size of something more than EUR 500bn but less than EUR 1trn.”
“The time for half-measures is over and for the euro the size of the program will be the crucial aspect in the days following the announcement.”
“After the SNB last week, the market is probably expecting something more than EUR 500bn, so a figure in or around this total may well prompt a period of EUR/USD reversal after heavy selling of late.”