Euro Extends Decline As ECB's Draghi Unveils €60 Bln/month QE Program
22 Janvier 2015 - 4:01PM
RTTF2
The euro continued its early slide against its major rivals on
Thursday, after the European Central Bank President Mario Draghi
launched the quantitative easing program to address the threats of
prolonged period of low inflation prevailing in the bloc.
Under the expanded programme, the combined monthly purchases of
public and private sector securities would be worth €60 billion.
The programme, which starts in March, will be carried out until the
end of September 2016.
Draghi kept the program open-ended, saying it will be pursued
until they see a sustained adjustment in the path of inflation
which is consistent with their aim of achieving inflation rates
below, but close to, 2 percent over the medium term.
"In March, the Eurosystem will start to purchase
euro-denominated investment-grade securities issued by euro area
governments and agencies and European institutions in the secondary
market. The purchases of securities issued by euro area governments
and agencies will be based on the Eurosystem NCBs' shares in the
ECB's capital key," he told.
"The prevailing degree of monetary accommodation was
insufficient to adequately address heightened risks of too
prolonged a period of low inflation," the ECB chief told in press
conference at Frankfurt. "Thus, the adoption of further balance
sheet measures has become warranted to achieve our price stability
objective, given that the key ECB interest rates have reached their
lower bound," he added.
The Governing Council held the refinancing rate at a record low
of 0.05 percent and deposit rate at -0.20 percent, following the
meeting. The decision was in line with economists'
expectations.
Last week, the Swiss National Bank abandoned its three-year-old
cap on the franc against the euro due the expected easing by the
European Central Bank. Such a move would increase the demand for
the safe-haven franc and would make hard for the SNB to defend its
self-imposed cap.
The euro has been trading in a negative territory in January,
amid uncertainty regarding the consequences of the Greek elections
on January 25, speculation that the ECB would launch sovereign bond
purchase at the earliest and on plunging oil prices that raises the
prospect of outright deflation.
The euro hit a 6-day low of 0.7599 against the Sterling, from
Wednesday's closing quote of 0.7665. The next possible downside
target for the euro lies around the 0.75 region.
U.K. budget deficit increased in December from last year, data
from the Office for National Statistics showed.
Public sector net borrowing excluding public sector banks
totaled GBP 13.1 billion, an increase of GBP 2.9 billion or 27.8
percent from last year.
Moving away from an early high of 1.1649 against the U.S.
dollar, the euro slipped to a 6-day low of 1.1510. Continuation of
the euro's downtrend may lead it to a support around the 1.135
mark.
The euro weakened to 0.9873 against the Swiss franc and 135.83
against the Japanese yen, off early high of 1.0031 and a 2-day high
of 137.30, respectively. Further weakness may take the euro to
support levels of around 0.965 against the franc and 132.00 against
the yen.
The euro edged down to 1.4176 against the aussie, 1.5216 against
the NZ dollar and 1.4202 against the Canadian dollar, retreating
from early 1-week high of 1.4407, new 2-week high of 1.5436 and a
5-week high of 1.4379, respectively. Next support levels for the
euro are likely seen around 1.41 against the aussie, 1.50 against
the kiwi and 1.40 against the loonie.
At 10:00 am ET, Eurozone flash consumer sentiment index for
January is to be released.
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