Monday 18 November 2019

Euro plunges as long-awaited 'QE' spree to start on Monday

Mario Draghi, president of the European Central Bank (ECB), leaves after attending a news conference following an ECB meeting in Nicosia, Cyprus, on Thursday, March 5, 2015.
Mario Draghi, president of the European Central Bank (ECB), leaves after attending a news conference following an ECB meeting in Nicosia, Cyprus, on Thursday, March 5, 2015.
Donal O'Donovan

Donal O'Donovan

The euro plunged and Eurozone bond prices rose yesterday after the European Central Bank (ECB) said it will begin a long awaited €1 trillion spending spree on Monday.

Under the plan the ECB will spend around €750m every month buying Irish assets - mainly government bonds - under the quantitative easing (QE) policy.

QE has been on the agenda for months but ECB President Mario Draghi outlined the mechanics of the programme at a press conference in Cyprus following a scheduled policy meeting. He left the door open for more bond purchases beyond September 2016.

The plan is aimed at lifting the Eurozone out of a slump that has persisited since the financial crisis in 2008.

The idea is to drive up economic activity by flooding the Eurozone with cheap cash.

"Mr Draghi is showing that the ECB is determined to continue until it gets the results it needs. They are perfectly aware that they cannot afford to fail," said Mauro Vittorangeli, a senior fixed income portfolio manager with Allianz Global Investors in Paris.

The euro fell as low as $1.1005, its lowest since September 2003, yesterday.

Yesterday, Mr Draghi revealed practial elements of his stimulus plan, including that the ECB will buy bonds that have so called negative yields.

"How negative can we go? Until the deposit rate (0.2pc)," he said.

(Additional reporting Bloomberg and Reuters)

Irish Independent

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