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Euro tanks on extension of stimulus program
Published on 27.10.2017 10:11

The Euro is under further pressure in today’s trading session after yesterday’s shock announcement from the ECB that more money would be flooding the market caught investors off guard.

At 4.28pm (AEDT) the Euro was trading at $1.1654 against its US counterpart, down from $1.1656 in yesterday’s trading session.

The ECB said it would cut its bond purchases in half to 30 billion euros a month from January, but hedged its bets by extending asset buys by nine months given continuously low inflation.

The European central bank announced today that they would slash their bod purchases by around 30 billion Euros a month starting from next year but shocked the market by announcing that the program would be extended by 9 months which saw investors panic and exit the Euro.

Analysts had predicted a reduction in the bond program but were left dumfounded by the extension.

ECB president Mario Draghi defended the decision to increase the program by noting that it had to be a slow process so as not to suddenly shock the market and the program will be reduced over time.

“The decision today is for an open-ended program, it’s not going to stop suddenly. The large majority of the Governing Council expresses a preference for keeping it open-ended” Draghi said.

“There is still a large amount of uncertainty, so it was only prudent” he added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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