European Central Bank QE Program
Current appreciation in EUR/USD and continued weakness in Oil prices are battling against the ECB’s bond buying program, creating pressure on the ECB’s Mario Draghi to “do more” in order to boost the Eurozone recovery.
The next ECB press conference is scheduled to take place October 22nd, since the September meeting, Mario Draghi and other ECB governing council members have reiterated their willingness to expand QE in an attempt to stimulate the economy further, however EURUSD trades near the high of its range around 1.1350
Will we see parity?
The EURUSD QE decline which saw levels as low as 1.0463 had banks lowering forecasts to below parity, however the past 6 months range between 1.05 and 1.15 has reduced the majority of year end forecasts around 1.08 which would continue to battle against the current stimulus program and doesn’t include any further action from the ECB.
What can they do?
Mario Draghi is running out of options, in the build up to the initial release of the QE program, it was the “talk” that started the decline of the euro which enabled the European Central Bank QE to effectively purchase government bonds. We could see a similar tactic deployed again by the ECB in the October meeting, talking the Euro exchange rate down by continuing to warn “further action” through expansion and extending the current QE stimulus.