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Mario praises early Asset Purchase successes

Mario praises early Asset Purchase successes

Yesterday ECB Chief, Mario Draghi praised the early success he views as being attributable to the European Central Bank Quantitative Easing Programme.  Much of his focus was on reiterating that the lengthy period of instability for both firms and households meant they were very hesitant to take on economic risk. Because of this, quite some time is needed before the success of the asset purchase facility can be declared. The monetary policy stimulus will stay in place as long as is needed for its objective to be fully achieved on a truly sustained basis. Ultimately, his tone was praising of the early signs of success for the programme.

During a conversation with IMF Head Christine Lagarde, he highlights some interesting factors as being responsible, in part, for the crises of the last few years. Banks holding too many bad loans was one particular factor that, coupled with the fragmentation of the banking sector, made it difficult to stimulate the flow of credit. Meaning that as the ECB injected nearly 1 trillion Euros into the banking sector through the Long Term Refinancing Operations (LTRO) in 2011 and 2012, banks bought government bonds instead of lending the money out.

The EUR pushed higher on the news and has continued to gently press on the USD and GBP.

The USD weakness continues on momentum and overnight developments have been fairly limited. Consequently, when examining the weaker Retail Sales figures mid-week and what that could mean for Q2 for the States, the focus remains on some softness for the USD.  Yesterday’s jobs data and Producer Price Index for the United States was weaker across the board, which provided further obstacles for the currency versus the EUR and GBP.

Today, not a lot of economic data is expected with only really the US Industrial Production and Capacity Utilisation figures of particular interest. The trend for the bulk of this week continues among the three principal currencies with the GBP losing some ground on the EUR and surging against the USD.

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