ECB Could Surprise

The battered euro has fallen fast and furiously in recent months—and may have to brace for another drubbing if the European Central Bank (ECB) delivers “shock and awe” monetary stimulus this week.

Analysts expect the ECB to unveil a sovereign bond-buying program worth in the region of 500-600 billion euros ($579-695 billion) to fight deflation and lackluster growth in the euro area. Such a number is already priced into markets and is expected to give the single currency some relief.

However, that’s not the only possibility, and as the Swiss National Bank demonstrated last week, central banks are not afraid to deliver the unexpected.  “If we see a real policy of shock and awe being conducted from the ECB, then easily we could find ourselves sub-$1.10 (for the euro), looking at $1.08 relatively quickly,” said Jeremy Stretch, a markets strategist with the Canadian stock broking firm CIBC.


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