"Whatever you want to say about the content of the decisions, the majority of the ECB Council is saying it is ready to go very far with monetary policy and break new ground"
- Jens Weidmann, Bundesbank Chief
As it was expected, German factory orders turned negative in August, but the actual data appeared to be more discouraging than projected. Industrial orders in the Euro zone's largest economy declined considerably by 5.7% from the previous month, recording the largest drop since 2009, whereas analysts had predicted a reading of –2.5%. However, July's gauge was revised upwards to show a healthy 4.9% growth. On an annual basis, the gauge slid 1.3% in the reported month, after recording an upwardly revised 5.9% increase in July, measured on a non-seasonally adjusted basis. Markets, however, had forecasted an annual increase of 2.6% in August. The worse-than-expected factory orders data comes after the German newspaper Der Spiegel wrote that the International Monetary Fund may lower Germany's 2014 and 2015 forecasts due to the geopolitical crises in Ukraine and the Middle East.
In the meantime, Jens Weidmann, President of Germany's central bank, criticised the ECB's plan to start purchasing asset-backed securities to kick-start the Euro zone's sluggish economy, as along with ultra low interest rates the scheme might set a risky precedent. He said that such steps mean "a fundamental change of course and a decisive change for the ECB's monetary policy". Weidmann and other critics believe that complex financial derivatives such as ABS were the main cause of the US sub-prime mortgage crisis in 2008.
© Dukascopy Bank SA