Key Points
- The ECB is expected to announce massive monetary easing on December 3rd.
- ECB President Mario Draghi has already under-promised and under-delivered
- EUR/USD has potential of a significant fall regardless of Fed hike expectations
- German bunds still have value despite elevated prices
Background
The European Central Bank is missing its single inflation target of “2% or a bit below” on headline inflation in the past two years. The Frankfurt based institution has already taken the historic step of setting a negative deposit rate in June 2014 and further lowering it to -0.20% in September 2014.
Stubbornly low inflation, due to falling oil prices and to a slow weakening of the exchange rate have led the ECB to forge ahead with a Quantitative Easing (QE) program of its own, playing catch-up with its peers in the US, the UK and Japan. The plan, announced in January 2015 and implemented since March runs at a scale of €60 billion per month and is officially intended to end in September 2016, reaching a total scale of €1.14 trillion.
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