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Why the Euro will not suffer from ECB’s Unlimited QE

The European Central Bank has given itself an unprecedented level of flexibility in its plan to buy 750 billion euros in additional bonds to curb the economic damage from the coronavirus pandemic. The Central Bank’s decision remains open to legal discussions.

According to the legal decision detailing the latest ECB plan, almost all restrictions on previous ECB asset purchase programs have been removed or substantially reduced.

Most importantly, the limit imposed on the purchase of no more than one-third of any country’s eligible bonds will not apply to the additional 750 billion euros it pledges to buy this year in response to the coronavirus crisis as part of its pandemic emergency program.

Immediately after the news, there was a note of worries from investors that the current situation would open the door to a major decline in the euro, as the ECB as a whole allows itself to print an unlimited supply, which will flood European markets and significantly depreciate the common currency. .

However, these concerns remain unjustified as actions taken by the central bank are more of a secondary effect or a wave than actions already undertaken by others – the US, UK, Australia – all raising their quantitative easing programs to help local their economies.

In this situation, the actions of the ECB simply offset the game, and at the moment, after this decision, their measures are merely mirrored to those of other banks, and even if the currency weakens, it weakens others – which offsets price levels. For this reason, individual charts such as EUR / GBP, EUR / CHF do not show large fluctuations.

Panic remains strangled in the air – and the charts show nothing special about the movements traded against the tech set of the week.


 Trader Aleksandar Kumanov


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