The collapse of the euro paused
At the auction on Friday, 3 October, the euro has stabilized around the level of $ 1,265. Main event of the week – ECB meeting left behind. It did not bring surprises, and the euro is not updated after the multi-month lows. The European Central Bank took a decision expected – left its key interest rate unchanged – at 0.05% per annum. The minimum interest rate on loans is equal to 0.30% per annum, and the rate to attract funds in deposits remained unchanged at minus 0.20% per annum. This news has not caused great excitement in the currency market.
Following the meeting, made by the head of the ECB, Mario Draghi. He said that the regulator is ready in mid-October start buying covered bonds in the IV quarter of 2014 – the securitized loans (ABS), reports Reuters. Program will last at least two years, said Draghi. Along with the new long-term loans to banks, this purchase will have a significant impact on the balance sheet of the ECB. “The new measures will support specific market segments that play a key role in financing the economy”, – said the head of the ECB.
Draghi did not give the expected volume of programs. This is partly explained by the fact that the final amount of such purchases may be determined by a new issue of securities, which is an imprecise number. But it makes up the ECB is very different from the programs of other central banks such as the Federal Reserve System (FRS) the USA, Bank of England and the Bank of Japan, which were given clear targets.
On the question of whether the bank has no plans to start buying government debt Draghi said that the Governing Council of the ECB is ready to continue, if necessary, to use unconventional measures. “If there is a need to further address the risks too long a period of low inflation, the Board of Governors intends to use more unconventional instruments as part of its mandate,” – said Draghi.
The bottom line. Following the meeting, Draghi introduced the more technical details of the purchase of bonds and securities backed by assets. But he did not mention the amounts or timing of the program. For the market it does not become a sensation, and not hearing anything for yourself interesting, the euro went into “outset”. It is possible that the euro now begin preparations for the corrective movement upwards. A flurry of news last week did not leave the euro likely to increase, and now during the lull of the information it can happen.
