Asian Open Volatility Shakes Markets and Sends CHF and JPY Soaring
The risk-off sentiment which began in Asia yesterday gathered momentum overnight, which saw bond yields, equities and commodity currencies fell in tandem.
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The European Central Bank (ECB) said it will start printing money next Monday (March 9th) to buy €1.1 trillion (£790 billion) worth of bonds in a bid to revive the eurozone economy.
Almost six years after the US Federal Reserve and Bank of England started their own quantitative easing (QE) programmes, the ECB expects that reducing the cost of credit will put Europe on the path to recovery. The move comes as the ECB raised its growth forecasts to 1.5 per cent this year and 1.9 per cent next year.
Year-on-year retail sales jumped 3.7 per cent in January as the delayed effects of falling energy prices feed through to household spending. However, the eurozone’s inflation rate is still standing at -0.3 per cent.
€60 billion per month
Mario Draghi, the ECB’s president, said the new measures started to bear fruits: "Our monetary policy decisions have worked," he said, as the euro went down 20 per cent against the dollar and the Chinese yuan since last spring, the Telegraph reports.
The ECB announced in January a QE programme to inject €1.1 trillion in the eurozone economy. From Monday, it will buy bonds worth €60 billion (£46 billion) per month until the end of September 2016 and possibly longer. The ECB will be purchasing euro-denominated investment grade securities issued by euro-area governments and agencies and European institutions.
It promised that national central banks would bear most of the risk of their governments defaulting, with only 20 per cent of the new bond-purchases subject to risk-sharing. The ECB also said eurozone interest rates will remain at the record low of 0.05 per cent.
Mario Draghi said the programme would be conducted until the EU can see "a sustained adjustment in the path of inflation".
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