Euro takes a thump as investors gorge on fresh QE

January 22, 2015 09:12 AM

The European Central Bank launched a significant program of quantitative easing at its January meeting, extending earlier covered bond purchases to government bonds and is set to expand its balance sheet by more than €1 billion between March through September 2016.

The move announced by its governor, Mario Draghi, weighed further on the single European currency unit, driving its purchasing power against the U.S. dollar to the lowest in 11 years. The euro currently buys $1.1465 and is close to its session low. The decision was widely flagged ahead of the meeting and seems to confirm the Bank’s desire to devalue the euro currency.

However, unlike last week’s Swiss National Bank policy shift, investors had anticipated Thursday’s move and have, as such, been positioning for ongoing euro weakness. Currently the euro is hanging in there but it seems just a matter of time before forecasters will be pointing to $1.1000 and possibly parity given the less certain impact QE may have of the stagnant 19-member Eurozone. Let’s make no mistake, a weaker euro has great potential benefits to manufacturers and exporting nations in general–just as long as there is fundamental demand for goods and services. That’s an employment concern, not an exchange rate one.

Chart shows euro remains under pressure

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.