19 Jan Euro under spotlight
This week the most important issues are related to the Euro.
The European Central bank (ECB) is set to release their monetary policies on Thursday. Forex Traders are looking to the ECB to increase their quantitative easing and purchase of government bonds, to support a weak economic recovery in the Eurozone. The issue is not if the bank will buy sovereign bonds, rather it is how the program is designed and if it is seen as credible and sufficient. Another issue is how the opposition from Germany’s central bank, politician, and public reacts to the quantitative easing which may shackle efforts by the ECB.
To add further volatility to the Euro, on Sunday there is elections in Greece where currently the anti-bailout party Syriza is leading in polls. This leadership would further undermine the euro zone’s credibility.
Anything that is under 500 billion Euro in a quantitative easing program would be disappointing and result in further losses for the Euro. Anything that is more than 700-bilion Euro would strengthen the Euro.
Currently we see the Euro trading at exchange rates close to 11 year lows.
In other news, we see Japan slide into recession last quarter due to ill-timed sales tax increase from the government. The Bank of Japan has tried to revive the Yen by increasing their buying of bonds at lower rates. This also results in a weaker yen and helps Japanese exporters.
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