Weekly Market Outlook: ECB Goes All In

The ECB and Mario Draghi has gone „all-in“ with a larger than expected policy easing package. But should inflation fail to respond, the ECB has few and less seasoned tools to work with.

Especially considering the focus shift from weakening Euro to quantitative and credit easing. Japan’s extreme effort to drive inflation and growth has come up short as incoming data has continues to disappoint. Failure in Japan highlights the risk in the ECB’s strategy.

The EM risk rally should continue near-term. With risk appetite improving, stimulus measure by the ECB and Banxico ready to raise rates to protect MXN, we remain constructive on the Latam currency.

Finally, with the ECB going “more negative” the likelihood that capital inflows into Switzerland increase. Traders should be prepared as the SNB stands ready to protect the CHF from further appreciation. 

This white paper provides analysis for major and emerging market currencies. Exploring the future trends of the financial industry. Discussing issues such as the action ECB took on interest rates.