ECB keeps rates unchanged, offers details on ABS purchases

Thursday, October 02, 2014

Global stock markets headed lower once again as the knock on effects of weaker than expected global manufacturing data and uncertainty surrounding ECB policy saw investors extend their retreat from risk assets. Benchmark stocks across Europe were under pressure throughout the day as market participants were anxiously awaiting the ECB’s monthly meeting. As expected the main refinancing rate was left unchanged at 0.05% with the focus instead shifting to the asset purchasing plan which was announced at last month’s meeting.

Investors, keen for further details from Draghi traded cautiously in the run up to the press conference with the JPY strengthening for the second straight session against the dollar, briefly touching 108.30 during the morning of the European session after the dollar showed some slight paring of recent gains early on in the European session.

During the press conference Draghi stressed further the need to address the persistent threat of low inflation but refrained from offering further details on the size and timeframe of the extended purchase programme other than stating that the ECB would buy covered bonds from mid-October and ABS (asset backed securities) in the final quarter of this year. The ECB president did not provide an exact figure for the size of the bond buying programme but stated that it would last for two years and that the central bank would aim to expand its balance sheet by up to €1tn, back towards levels last seen in early 2012.Supplementary details were given in a separate press release after the news conference.  

Across the Atlantic, on the macro data front US investors were pleasantly surprised after initial weekly jobless claims fell 8,000 w/w to 287K against expectations of an increase to 297K. However, overhanging geopolitical tensions and concerns regarding the Ebola outbreak in Africa have kept many investors on the side-lines, with both the S&P 500 and DJIA trailing between 0.2%-0.4% lower at the time of writing. 

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Topics: ECB, JPY, DXY
More from: Kash Kamal