ECB follows Federal Reserve's suit; hints at QE wind-up: Angel Commodities Broking

Views by Mr. Prathamesh Mallya (Chief Analyst- Non-Agri Commodities & Currencies, Angel Commodities Broking):

"After slumping for major part of the month, the Euro currency has once again revived pushing the shared currency to a nine month high at 1.1379 while writing. What caused the commotion was the startling hint by the ECB President Mario Draghi of winding down the € 2.3 trillion of Quantitative Easing program. The program which was first started in the year 2015 has done wonders for the European Union. The initial €80 billion and now €60 billion per month bond purchases have aided growth and investment. Low inflation rate which was the prime reason for starting the QE program is now hovering closer to the ECB's 2 percent inflation target. Not forgetting the continuous uptrend in manufacturing and service sector that has revived the Union's GDP growth number.

Apart from the unspoken indication, Draghi also mentioned something about 'strengthening and broadening recovery' in Euro-zone. The uncertain global events have prompted Draghi to adopt a conscious and gradual approach in making any policy decision. This was an unspoken hint at to the entire union member's especially Germany who pressured the Bank to start tightening the program given the economic recovery. It is quite clear that the ECB doesn't want the taper tantrum to be repeated again that had engulfed the financial markets four years ago when the US Feds had done a similar stint.

Markets, for now, are reeling with the announcement which has pushed the Euro currency higher. Another reason for the surge in shared currency would be the Italian banking deal and the US health-care vote delay which played in favour of the Euro. All in all, the after-effects of the pomp and gaiety given by the ECB will last for few days more."

Source : Equity Bulls

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