The ECB announcement of a 10 basis point rate cut and the launching of a new, open-ended, bond purchase program appears to initially have shocked the markets, leading to a pronounced drop for the Euro, more due to the new cycle of QE than to the rate cut, which was widely expected.
However, the initial shock was replaced by a more rational reaction, as the ECB’s determination to do the necessary to stimulate growth and bring the Eurozone inflation close to the 2% target, reassured investors, supporting the recovery of the single currency. The positive sentiment was reinforced by good news on the trade front, as reports of an eminent deal between the Us and China started to surface, giving a boost to risk related assets.
Photo by Denys Nevozhai.
