Eurozone Renaissance Starts on Monday
Good morning. In moves that surprised no one, the Bank of England and European Central Bank both decided to keep interest rates on hold. But the markets weren’t concerned about this, all attention was on Mario Draghi in his press conference after the rate announcement.
Draghi presented the case for Quantitative Easing clearly and confidently which will have assured the onlookers. He announced that the newly titled Public Sector Purchase Programme (PSPP), as opposed to the previously named Asset Purchase Programme, will commence on Monday 9th March. The risk to the Eurozone is diminishing due to the fall in oil prices, monetary policy and the falling exchange rate, and Draghi was certainly bullish in his predictions for the success of QE, hinting that it would end in September 2016.
Inflation in the Eurozone is currently at -0.3% but is predicted to be 1.5% in 2016. If this happens and the Eurozone is on an upward trajectory towards its 2.0% goal then expect September 2016 to be the end of PSPP. There is certainly an air of finality around this programme and a strong belief amongst Draghi and his peers that this will be successful. Growth forecast has been raised from 1.00% in 2015 to 1.5% and 1.9% in 2016 from the previous years estimate of 1.5%. If these levels are reached then we will certainly be seeing a much more stimulated and successful Eurozone.
Today we see the all important Non Farm Payrolls report from the US.This is always of huge importance due to the direct correlation between the US employment market and the Fed’s interest rate decisions. The markets are braced for more positive figures and anything over 200k jobs added could spell more weakening for the Euro.
Have a good weekend!