Euro is not yet ready to take positions

Euro is not yet ready to take positions

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The euro constrains geopolitics

The euro started the new week in the area of ​​$ 1.3650 Forex Players are immersed in the study of the prospects of the market in the new paradigm of the ECB. The most important thing that surprised players – is that managing evroregulyatora Mario Draghi from words came to the point, analysts say “Raiffeisenbank”.

Expectations that the ECB will take decisive action in response to weak credit growth (April lending real sector decreased by 2.7% on an annualized basis) and low inflation (0.5% in the euro area in May, below the 2% target), realized . From June 11 to provide liquidity to the key rate has been reduced by 10 bps – Up to 0.15%, the rate of liquidity, banks placed in the ECB beyond the minimum trims also reduced by 10 bps – To minus 0.1%. In September and December will be held operation (targeted LTRO) to provide liquidity to banks for four years at a fixed rate (the key rate 10 bps) with a limit of 7% of the portfolio of loans to non-financial companies and households (excluding mortgages) on April 30. According to estimates of the ECB, under TLTRO banks will take 400 billion euros. Thus, on the one hand, the controller is ready to pour in a large amount of cheap liquidity, and on the other – introduces penalties (in the form of negative interest rates on deposits) for the fact that banks do not lend to the real sector, to ascertain “Raiffeisenbank”. On June 4 the amount of excess liquidity in banks located beyond the mandatory requirements of the ECB, was 125 billion euros. As a result of the real sector of the euro area may come up to 525 billion euros.

Players in global markets all week were awaiting the decision of the ECB, and its declared measures became an occasion for a sharp rise in investor activity, said in turn PSB expert Alexei Yegorov. Yield of ten EU government bonds, which began to show growth, ended the day lower, that seems logical. As part of the U.S. session UST-10 yield slipped a bit. In the global currency market the euro / dollar showed strong volatility.

Meanwhile, the ECB is preparing to buy back securities market securitization (ABS, secured credit requirements for the private non-financial companies in the euro area), added specialists “Raiffeisenbank”. M.Dragi expects that these measures will lead to an acceleration in inflation to 1.5% until the end of 2016. and increase the GDP growth rate to 1.8% (vs. expected in 2014. 1%).

At the end of 2011. – Early 2012. ECB poured in 1 trillion euros, but most of these funds due to low demand for loans was unclaimed (excess liquidity, the ECB allocated more than 600 billion euros), and then the Bank repaid the debt to the regulator. As a consequence, “Raiffeisenbank” do not exclude that and now banks do not present a high demand for liquidity, as the level of credit risk in the euro area remains high and there is a shortage of capital (low profitability). With criticism of the ECB made the German side: according to a member of the Finance Committee of Parliament, “the key to overcoming the economic crisis are structural reforms, not the policy of reducing rates.” In the short term experts “Raiffeisenbank” expect lower bond yields and long-term positive effect of these measures will be offset by expectations of Fed tightening.

As a result, we can conclude that the market was generally satisfied with the decisions of the ECB, but as long as the players do not see the real action, let the euro down, they do not intend to. As a result, in the last session of the rise of the single currency and its immediate goal, it seems, serves mark of $ 1.37