ECB Boosts Stocks and Drags Euro

European stocks rallied and the euro fell to near a one-year low against the dollar on Monday as expectations grew that the European Central Bank would loosen policy.

ECB President Mario Draghi said late on Friday that the bank was prepared to respond with all available tools inflation in the euro zone dropped further.

Investors speculated this meant the ECB was more likely to embark on an asset-purchase program, or quantitative easing, or adopt other stimulus measures in coming months.

Draghi’s comments caused yields on most euro zone government bonds to fall to record lows and European stock markets to rise. They overshadowed the resignation of the French government and a weak German Ifo business sentiment survey.

“The key message is that Draghi stands ready for more action if needed,” said Franz Wenzel, the chief strategist at AXA Investment Managers in Paris.

“Whether they’re going to do quantitative easing remains to be seen, but we’re fairly confident that the financial engineers at the ECB will find other tools. At this juncture, we don’t exclude quantitative easing at the end of this year.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza