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ECB Extends QE Program Until Dec 2017

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ECB President Mario Draghi Opens New Headquarters
  • ECB Extends QE Program Until Dec 2017

The European Central Bank (ECB) announced a continuation of the bank’s generous asset-buying program on Thursday, although a reduced pace of purchases is set to start from April next year.

Current asset purchases of 80 billion euros ($86 billion) a month were due to end in March 2017, but will now be extended until at least December 2017 and will be cut to 60 billion euros a month from April 2017, the bank said in a statement. Benchmark interest rates were left unchanged.

The ECB was widely expected to announce it will continue with its massive trillion-euro bond-buying program at its meeting on Thursday, in an attempt to boost the euro zone’s economic recovery.

In what is the most closely watched ECB meeting in several months, President Mario Draghi is expected to talk at a press conference at 1.30 p.m. London time.

A reduction in asset purchases could risk a euro zone version of the so-called “taper tantrum” in the markets — even though a lesser amount for a longer period would result in the ECB buying more bonds.

Taper-tantrum

“Amid growing evidence of a more robust recovery and improved policy transmission, there is a case for a reduction in the pace of asset purchases at some point in 2017, if anything because stocks matter more than flows in the ECB’s view,” Frederik Ducrozet, economist at Pictet said in a note before the announcement.

“However, signaling an eventual tapering of asset purchases now would almost certainly trigger an unwarranted tightening of monetary conditions, or ‘taper tantrum’, that might jeopardize the recovery and force the ECB to do more,” he added.

ECB members, in the run-up to the meeting, have emphasized it was “crucial” to stick with easy financial conditions particularly with the continent’s stubbornly low inflation levels.

The euro hit three week highs against the dollar shortly ahead of the ECB meeting on Thursday as investors appeared to project Draghi would adopt a somewhat less dovish stance than in the past and avoid a taper tantrum in the market.

Investors are increasingly anxious about both economic and political stability in the 19-nation euro zone after Italian voters rejected constitutional reforms over the weekend and crucial general elections are due to take place in 2017.

Meanwhile, Europe’s central bank is at odds with the Federal Reserve which is anticipated to raise interest rates at its meeting next week.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Oil 1

Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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