EUR/USD: QE restart doesn’t quash Euro - CIBC

Analysts at CIBC see the EUR/USD pair rallying in 2020 despite the new open-ended QE program from the European Central Bank (ECB) announced on Thursday. 

Key Quotes: 

“Outgoing ECB President Mario Draghi made his final roll of the dice this week, cutting the deposit rate further 10bp and restarting QE bond purchases. With no end date given for those purchases, the euro initially weakened, only to rally later on as investors realized that the scale of stimulus was fairly small and as such fiscal policy will be more important going forwards. In fact, at the instated 20bn euro a month pace, it would take around 12 years for the current QE programme to inflate the ECB’s balance sheet as much as the 2015-18 version of QE did.”

“A greater leaning towards fiscal rather than monetary policy is generally positive for that country’s currency, and we see the euro rallying versus the US$ in 2020 as a result.”