ECB unsettles markets
The European Central Bank sent waves through markets last week when it delivered a package of measures that exceeded expectations. Most notably the bigger-than-expected boost to monthly bond purchases. Calmer conditions did, however, return to markets and global stocks continued to rally.
Unfortunately, the ECB President reinforced the view that the ECB is running out of ammunition. He suggested that interest rates have reached a bottom. It has become abundantly clear in recent years that monetary policy alone cannot address all of Europe’s problems.
- sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 15 Mar 16
-
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healt...
Duration 02:31
-
-
The European Central Bank sent waves through markets last week when it delivered a package of measures that exceeded expectations. Most notably the bigger-than-expected boost to monthly bond purchases. Calmer conditions did, however, return to markets and global stocks continued to rally.
Unfortunately, the ECB President reinforced the view that the ECB is running out of ammunition. He suggested that interest rates have reached a bottom. It has become abundantly clear in recent years that monetary policy alone cannot address all of Europe’s problems.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
-
Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
-
Markets climb as investors watch US healthcare bill
Duration 02:31
Unfortunately, the ECB President reinforced the view that the ECB is running out of ammunition. He suggested that interest rates have reached a bottom. It has become abundantly clear in recent years that monetary policy alone cannot address all of Europe’s problems.
That said the ECB’s bond purchase programme is still smaller than those undertaken by the US Federal Reserve and the Bank of England.
We have observed that lower interest rates and looser monetary conditions are not having the desired effect of increasing demand. Only FX depreciation appears to be working.
This explains why many central banks are focused on the level of FX – even though they may not care to admit it publically.
The current weakness of the US Dollar and strength of the YEN and Euro will cause issues for growth in Japan and Europe.
The Reserve Bank of Australia is also likely to be concerned now that the Australian Dollar is around 0.75c again. Continued strength in the Australian Dollar may force the RBA to cut rates whilst it has room to do so with weak inflation.
Of course, strength in the Aussie Dollar is linked more to the recent rise in commodity prices rather than the interest rate differential between Australia and the US.
The uptick in commodities will most likely run out of steam as shorts have now been squeezed out of the market and fundamentals have not really changed.
In the US, the Fed is very unlikely to hike interest rates this week despite improving economic data and the recovery in financial markets.