Trading News Events: EUR Interest Rate - ECB To Announce Quantitative Easing (QE) Program

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EURUSD, M5, 2015.01.22

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EURUSD M5: 62 pips price movement by EUR - Interest Rate news event

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newdigital, 2015.01.22 19:34

Daring Draghi's Massive Stimulus Beats Expectations (based on rttnews article)

European Central Bank President Mario Draghi unleashed a massive quantitative easing programme on Thursday, the size of which exceeded market expectations, determined to combat the threat of deflation and revive the euro area economy.

The widely expected quantitative easing measure was described by Draghi as "an expanded asset purchase programme". Under the plan, the combined monthly purchases of public and private sector securities will amount to EUR 60 billion ($70 billion), he said.

In response to the ECB announcement, the euro weakened and the Euro Stoxx strengthened to fresh 7-year highs. Earlier today, the bank left its interest rates unchanged for the fourth straight month.

The main refi rate was kept at a record low 0.05 percent and the deposit rate at -0.20 percent. The marginal lending rate was retained at 0.30 percent.

The size of monthly asset purchases exceeded the EUR 50 billion reported in the press since Wednesday. With the latest decision, Draghi has crossed the Rubicon to join ECB's peers US Federal Reserve and Bank of Japan who took the QE route long back.

Previously, Draghi revealed his daring by entering the uncharted territory of negative interest rates last June in his mission to defend the ECB's price stability target.

His resolve must have been strengthened by last week's EU court backing for ECB's earlier bond-buying programme known as the Outright Monetary Transactions. That said, the German opposition to stimulus, especially ECB purchases of state debt, remains.

Adding pressure, Eurozone inflation turned negative in December for the first time in more than five years in December with consumer prices falling 0.2 percent. Falling oil prices are set to make the picture murkier. High unemployment is another grave concern.

The asset purchases are intended to be carried out until end-September 2016. They will remain in place until there is "a sustained adjustment in the path of inflation which is consistent with" the ECB's aim of achieving inflation rates below, but close to, 2 percent over the medium term, Draghi said in his customary post-decision press conference in Frankfurt.

"In March 2015 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," he added.

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newdigital, 2015.01.23 04:21

Video: ECB Move Drives EURUSD to 11-Year Low, EURJPY On the Edge (based on dailyfx article)

• An ECB QE program that worth over €1.1 trillion was enough to send the Euro reeling and equities rallying
• Though the efficacy of monetary policy is coming under greater scrutiny, the FX market follows the trend
• Between the ECB reaction, FOMC next week and questionable risk view; EURUSD and EURJPY lead the way

The monetary policy ranks provided the markets another large injection with the news that the ECB was following its largest counterparts down the path of QE. The response for the Euro was decisive as EURUSD marked its worst daily tumble in over three years on the way to the lowest exchange rate since 2003. This pair will be particularly important to monitor moving forward as we gauge the net influence of stimulus as well as its relative effectiveness. With EURUSD, we now pair the most accommodative central bank (ECB) pitted against the most hawkish (Fed). Will the European authority be effective - even through the upcoming Greek election? Will the FOMC maintain its drive towards a mid-2015 hike next week? Meanwhile, the net impact of global stimulus on speculator interest may be better reflected in a pair like EURJPY. With new stimulus upgrade and a high-level sensitivity to risk trends, a 135 break can signal a broader tide change. We talk big themes, upcoming event risk and well-placed currency pairs in today's Trade Video.