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Fitrullah Research Institute

Friday, March 11, 2016

Analysing the ECB Agenda> EuroUSD Shoot 1.1178 after ECB cutting rates!

>>>Learn about ECB Agenda before till now: <<<<
Analysing the ECB agenda and what has been done:
1. Combat persistently low inflation --> Failed.
The classic approach QE failed for three consecutive years to reach the declared 2% of inflation -after 4.5 trillions stimulus issued, 1.5 last year.
The price of the commodities dropped and this contributed to drive the inflation fell to a 10-month low of 0.7% concerning investors.

2. Without undermining the region's fragile banks and growth --> Failed.
Cutting interest rates means to cut also bank's main source of revenues as happened in Japan.
As consequence the european banks stocks have been declining at a constant pace.
On the other side the Cocos issued by local banks have not proved to be successful as investors are scared to burned their funds (<Instead of bailing out the banks if they fail, coco investors will "bail in" and Deutsche's cocos have tumbled>cit. The Telegraph).

What is planning now the ECB:
- Another stimulus program --> sounds controversial
- Increase in its corporate bond repurchase program at least €10 billion a month to reach
€70billion --> injecting money to the market has already proved its scarce effects in relaunching the economy in the medium term
- cut the deposit rate by 0.1% point (to -0,4)
Until today these measures have not met the expected result       undermining the investor's faith and creating a climate of fear.

I believe the european market needs structural and political reforms tailored to those countries with economic imbalances, vulnerable financial sector and scarce competitiveness.
Less lobbies (including Bruxelles) and more smart work:)          Arguably the ideology and attitude towards work cannot be fully improved in one economic cycle and the south european countries are proving this year after year. (Giulio Sartori)

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