World economy talk

[safeorigin]

I wonder on how soon might QE4 happen

[Lady Bathory]

Leaks ahead of today's ECB decision took away the element of surprise. According to Bloomberg ECB Seeks to Inject Up to 1.1 Trillion Euros Into Economy in Deflation Fight - Bloomberg the ECB "proposed spending 50 billion euros a month through December 2016" and according to the WSJ ECB Executive Board?s QE Proposal Calls for Roughly ?50 Billion in Bond Buys Per Month - WSJ the ECB "proposed buying roughly €50 billion ($58 billion) a month in bonds for at least a year" which sounds more open-ended. EURUSD fell initially then quickly rebounded. The quick rebound from session low ($1.1565) to session high ($1.1680) shows expectations are largely priced-in. I think the risk is to the upside as traders will take profits on euro shorts rather than add positions to an already-crowded trade.

[Lady Bathory]

The ECB announced QE. It's bigger than expected. EURUSD falls below 1.15.
ECB Unveils Stimulus to Boost Economy - WSJ

FRANKFURT—The European Central Bank said Thursday it plans to purchase over €1 trillion ($1.157 trillion) in public and private sector bonds by the fall of 2016, a landmark decision aimed at combating stagnation and ultralow inflation in a region that has emerged as a top risk to the global economic recovery.

ECB President Mario Draghi said the ECB will buy a total of €60 billion a month in assets including government bonds, debt securities issued by European institutions and private-sector bonds. The purchases of government bonds and those issued by European institutions will start in March and are intended to run through to September 2016, Mr. Draghi said. The risks associated with the bonds of EU institutions will be shared, but purchases of other government bonds won’t be subject to loss sharing, he said.

Mr. Draghi said bond purchases might continue beyond September 2016, and until there are clear signs that the annual rate of inflation is rising toward the central bank’s target of just below 2%. The ECB also lowered the interest rate it charges on its four-year loans to banks by 0.10 percentage point.

[Monseratto]

FX rates (BDO) vs PHP

Euro= 50.66
USD = 44.35
JPY = 0.375

Nice time to travel...

[Lady Bathory]

The size of the ECB's bond buying program exceeded everyone’s expectations sending the euro sharply lower. All that's needed now is a Fed rate hike to send EURUSD down to parity. Monetary policy divergence between the Fed, the ECB, and the BOJ is the foundation of my strong-dollar thesis which i proposed early last year. The dollar already made a huge move but i believe it has further to go.

[badkuk]

mam/sir, i read this article just now:

What Draghi’s Bond Buying in Europe Means for U.S. Debt Markets

Pardon my ignorance, i'm just just barely grasping what's going on: since there is buying pressure for EU bonds, more will be sold at lower rates, thus further increasing the spread between US and EU bonds?

[Lady Bathory]

Yes the presence of a huge buyer (the ECB) in the eurozone bond market will suppress eurozone bond yields.

[Monseratto]

Goodbye Euro...Hello Drachma.

EUR-USD 1.1145

With nearly 75% of the votes counted, Syriza is projected to win 149 seats, just two short of an absolute majority, though that number could change.

BBC News - Greece election: Anti-austerity Syriza wins election

[niky]

Goodbye Euro...Hello Drachma.

EUR-USD 1.1145



BBC News - Greece election: Anti-austerity Syriza wins election

Goodbye EU, hello Pompeii?

[Lady Bathory]

A "Grexit" may seem appealing it will be a nightmare for the EU which has no mechanism for a member state leaving it. Target-2 imbalances will spike as Greeks rush to preserve their euro accounts before conversion to drachma. The more funds are moved out the more the Bank of Greece will owe the Eurosystem via Target-2. And you have holders of Greek debt who could see a 50% haircut on their holdings. Other recipients of bailout funds will also want to renegotiate.