ECB President plan awaited
Last week the Jackson Hole Symposium took centre stage on Friday with a vastly important speech from Federal Reserve Chairman Ben Bernanke heading the bill. In the week ahead, a similar dynamic appears as markets focus on the Draghi Plan to fix the Eurozone’s debt problem and the Bank of England will also be announcing its latest interest rate decision. The hope is that Mario Draghi and company will finally unveil the details of the heretofore opaque bond-buying program meant to contain the rise in borrowing costs for debt-strapped Eurozone member states and bolster regional financial stability.
Draghi initially hinted on August 2 that the ECB would create a program to buy government bonds of Eurozone member states that apply for funding assistance through the European Stability Mechanism (ESM), the permanent bailout fund set to replace the temporary EFSF. He has also pointed out that only structural reforms in individual countries can secure the competitiveness and stability of our currency, not bond purchases.The Draghi plan involves any country wanting the ECB to buy its bonds to seek help from the Eurozone rescue funds first to which conditions would be attached.
Sterling rose a two week high against dollar after UK manufacturing PMI data was stronger than expected. However German manufacturing has missed expectations, despite a small improvement. Markit’s PMI rose to 44.7 in August from 43 in July, but remained well below the 50 mark that separates growth from contraction. That means German manufacturing has been shrinking for six months on the trot.
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