![]() ![]() The ECB had already moved past strictly sovereign debt to include eligible debt from regional governments, and so by including the corporate sector makes a blunt commitment to encouraging business lending in the euro area. The reaction in currency markets somewhat overlooked what, in our view, was the biggest development to come out of this announcement, which was an increase in the ECB's asset purchase program to €80 billion per month which will also include eligible corporate bonds in the coming quarter. ![]() Nicholas Spiro at Lauressa Advisory in London wrote Thursday that, " If the sole measure of success of today’s crucial ECB meeting was a sharp decline in the euro versus the dollar, then it can only be judged as a spectacular failure." Whether or not this was Draghi's sole aim, of course, is up for debate (and, frankly, probably unlikely). (The euro, for example, had one of its largest one-day swings in history, rising more than 3% from its initial decline.) If the ECB had judged it needed to cut rates further, it would have cut them on Thursday. Of course, this isn't exactly news, in a way, and certainly not the kind of thing with a few days' hindsight that ought to have triggered an outsized market reaction. Initially, markets acted the way you'd expect after a big move from a central bank: the euro was weaker, stocks were higher, bond yields were higher, but comments from Draghi during his press conference that there were no standing plans to cut rates reversed this trade. The ECB took all of its interest rates down, with its cut in the deposit rate to -0.4% grabbing the most attention as the implications of negative interest rates have been the dominant story in markets over the last six weeks. ![]() ![]() The big story last week was the bold action taken by the European Central Bank to cut rates, increase its asset-purchase program, and show a firm commitment to supporting the European economy. Account icon An icon in the shape of a person's head and shoulders. ![]()
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