Euro (€) Currency Thread

dealsearcher

inspector_monkfish wrote: »

... lets hope the ECB dive into the QE pool and we might get a rally froom the Pound against the EUR.

I read somewhere that the ECB can't do QE because of their rules.

blizeH

No where near London unfortunately!

Gonna try and grab some cash later, but seriously though... of Post Offices, banks and travel agencies, which should I be checking? Or will they all be very similar?

Cheers

dealsearcher

Just (partly) answered my own question:

http://ftalphaville.ft.com/blog/2009/03/19/53798/qe-and-the-ecb/

Cunning stuff.

dealsearcher

... And from this article:

The European Central Bank has already embarked, in effect, on emergency "quantitative easing" to boost the eurozone economy but stands ready to do more if deflation risks emerge, according to Christian Noyer, governor of the Banque de France.

Hugely expanded ECB operations to pump extra liquidity into the banking system, renewed last week, had taken the central bank into "non-standard monetary policy", Mr Noyer said in an interview with the Financial Times. "It is a way of doing quantitative easing, certainly."

inspector_monkfish

dealsearcher wrote: »

I read somewhere that the ECB can't do QE because of their rules.

thats right, but there are ways and means around these things.

rules/laws are there to be bent at the end of the day, they are all dodgy politicians!

inspector_monkfish

16:55 19Mar09 -Q+A-Differences in the ECB's approach to quantitative easing
March 19 (Reuters) - A U.S. Federal Reserve plan to buy up more than $1 trillion worth of debt to drive an economic recovery has focused attention on whether the European Central Bank will come up with similar unorthodox plans.
However, ECB policymakers have stressed that differences between the United States and euro zone are likely to play a role in any decision to implement "quantitative easing".
Following are key issues facing the ECB:

WHY DOES THE ECB THINK EUROPE IS DIFFERENT?
Apart from the biggest companies, euro zone firms traditionally tend to borrow money from banks rather than by issuing bonds and commercial paper, as many U.S. firms do.
Analysts say around 70 percent of company borrowing comes via bank loans, with roughly 20 percent from equity issuance and the remaining 10 percent from bond issuance and other forms of borrowing.
According to ECB President Jean-Claude Trichet, outstanding bank loans to the private sector amounted to around 145 percent of GDP in the euro zone at the end of 2007, but only 63 percent in the United States. By contrast, direct debt securities amounted to 81 percent of GDP in the euro zone but 168 percent in the United States. Outstanding corporate loans from euro zone banks totalled more than 4.5 trillion euros ($6,071 billion) in January 2009.
European firms, excluding those based in Britain, have $6.3 trillion of investment grade corporate debt in circulation according to Reuters data.
The ECB needs banks to increase lending to struggling companies again, and has stressed that a return in confidence among counterparties is crucial.
The ECB is already trying to shore up confidence by promising a continuous flow of liquidity in both euros and dollars. In recent weeks policymakers have also stressed they will continue to focus on the banking sector and money markets.

DOES THE ECB FACE LEGAL CONSTRAINTS?
Trichet has said the ECB does not feel constrained by current laws governing the bank. Existing rules mean the ECB could not copy the Fed's move exactly by buying debt directly from governments. However it can buy debt second-hand from commercial banks and other institutions via the market.
The statutes say the ECB can buy other types of assets. So analysts feel that legal changes would be unnecessary if the ECB wanted to start asset purchases. If it wanted to buy government debt directly, lawmakers could probably push the changes through in one to three months provided all EU governments agreed, legal experts say.
For the section of EU law dealing with the prohibition on monetary financing, please click on the link and see Article 21
http://www.ecb.int/ecb/legal/pdf/en_statute_2.pdf

WHAT ARE THE PRACTICAL CONSTRAINTS?
In all its actions the ECB has to make sure there is a level playing field among the 16 euro zone countries, and this is difficult as European financial markets remain quite fragmented. For example, buying commercial paper would help firms in France, Spain and Germany, where there are sizeable commercial paper markets, but would be of little benefit elsewhere.
Buying up government debt would also be politically sensitive and likely to create tensions if individual governments felt that others were getting preferential treatment.
WHO WOULD FOOT THE BILL?
The ECB could expand its balance sheet, creating money to raise funds for buying debt. But policymakers have indicated this would not be the best solution, as it is not backed up by one treasury that would foot the bill for any losses.
ECB Executive Board member Juergen Stark said last month it may be unrealistic to expect the ECB to buy debt.
"Some of the key measures adopted and applied by the Fed are based on Treasury guarantees, so there is no or limited risk for the Fed. It is not feasible in my view to expect the ECB to do the same without government guarantees," he said. [ID:nLG358894]
The European Union has limited funds at its disposal, and euro zone finance ministries are already using their room for manoeuvre with fiscal stimulus packages.

WHAT DISADVANTAGES DOES THE ECB SEE IN VERY LOW RATES?
Trichet has said several times there are a number of drawbacks, but has not elaborated much.
Stark has said that very low rates would not necessarily reactivate the interbank lending market. There was also a danger that unprofitable investments would be made and the foundation for new excesses established, he added. [ID:nLG371233]
Governing Council member Yves Mersch has warned that very low rates could make monetary policy ineffective. However Athanasios Orphanides, another Governing Council member, has called such an argument a fallacy.

dealsearcher

Suddenly up to 1.067. What happened there?

inspector_monkfish

dealsearcher wrote: »

Suddenly up to 1.067. What happened there?

EUR got sold off against USD, GBP followed it a little...

inspector_monkfish

11:10 20Mar09 UPDATE 1-Euro zone Jan output plunges, points to deep ECB cuts

BRUSSELS, March 20 (Reuters) - Euro zone industrial output staged a new record plunge in January, pointing to a further sharp contraction in the economy this year and boosting pressure for further deep ECB rate cuts and quantitative easing.

Production in the 16 countries using the euro fell 3.5 percent against December, the fifth straight month of decline, for a 17.3 percent annual drop -- the deepest since records began in 1990, the European Union's statistics office said.
"The euro zone industrial production data for January are breathtakingly awful, adding to the evidence that manufacturing activity has fallen off a mountain rather than a mere cliff," said Howard Archer, economist at IHS Global Insight.

Economists polled by Reuters had expected on average a 4.0 percent monthly decline in output and a 15.5 percent year-on-year fall.
"On a three-month annualised basis, the contraction in industrial output is even more shocking: at around 30 percent as of January, it is 20 percentage points worse than at the trough of the last two downturns," said Ken Wattret, economist at BNP Paribas.

"This points to spectacularly large contractions for 2009 as a whole: around -4 percent for GDP and -15 percent for industrial production are plausible outcomes," he said.
Eurostat said capital and intermediate goods production suffered the most, falling 6.0 percent and 3.6 percent on the month respectively for 21.4 and 24.4 percent year-on-year declines.

"Plunging industrial production in January heightens fears that euro zone GDP will contract in the first quarter of 2009 by even more than the 1.5 percent quarter-on-quarter drop seen in the fourth quarter of 2008," Archer said.
"Consequently, there is intense pressure on the ECB to cut interest rates further at its April 2 policy meeting, and we expect the bank to deliver another 50 basis points reduction from 1.50 percent to 1.00 percent," he said.

Economists said, however, the scale of the slowdown may mean the European Central Bank would be forced to do more than just cut interest rates.
"The downside risks to the ECB's revised growth forecasts appear to be already materialising and this adds to the case for further significant policy easing," said Nick Kounis, economist at Fortis Bank.
"With the deposit rate not too far from zero it has already almost exhausted its room for manoeuvre on interest rates. So the pressure is on for the central bank to enhance its unconventional measures," he said.

dealsearcher

Ah! Now back to the status quo. 1.062.