ECB announces end of QE
The euro flipped out on Thursday afternoon, the single currency completely ignoring the ECB’s major QE news to focus on what was not discussed in its June get-together.
Surprisingly analysts who thought the central bank would hold off until July, the ECB announced on Thursday that it would be removing the eurozone’s long-running QE crutch by the end of the year. The specifics have the programme halved to €15 billion in purchases a month from September onwards, with bond-buying ceasing altogether in December.
Conventional wisdom would dictate that the euro would be busting out the champers. However, single currency instead put all its energy into furiously reacting to the fact a hike from the ECB is still a long, long way off, with estimates suggesting rates won’t be raised until summer 2019. It’s so far from the ECB’s hive-mind that Mario Draghi claimed the topic wasn’t even discussed during Thursday’s meeting.
Combine this with the central bank slashing the eurozone’s growth forecasts from 2.4% to 2.1% in 2018 due to the impact of the trade war troubles and the euro found itself down 1.1% against the dollar and 0.7% against the pound. In contrast, the region’s indices were overjoyed at both the rate hike delay and the euro’s violent reaction; the DAX shot up 1.6% to hit 13100 for the first time in over 3 weeks, while the CAC crossed 5500 as it rose 1.3%.
Elsewhere the FTSE, riding the coattails of its eurozone peers, jumped 0.8% to hit a 3 week peak of 7775. The UK index benefited from the pound’s downturn against the dollar, the strength of the US retail sales reading (and Wednesday’s Fed rate hike) outweighing the UK’s own retail beat.
As for the Dow Jones, it recovered some of yesterday’s Fed-driven losses, climbing 70 points to re-cross 25250.
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