-Erik Nielsen, UniCredit
Last week Mario Draghi took no decisive action, neither to lower the main refinancing rate nor launch ECB's own U.S.-style quantitative easing programme. However, he made it clear that soon the ECB will follow the Federal Reserve and the Bank of England by firing up his virtual money printing press and injecting hundreds of billions of euros into the struggling economy.
This week Mario Draghi flies to the United States, leaving a huge, trillion-euro question mark hanging over the 18-nation bloc. ECB's President will be under scrutiny by the IMF to present a full plan of introducing the stimulus programme, and according to economists from UniCredit and Deutsche Bank, investors are preparing for a disappointment. Some officials claim that the ECB will try to lean forward its credit-enhancing programme that has been recently tested by buying around 80 billion euros per month over one year. It helped to boost the inflation by as much as 0.8%. At the same time, time buying government bonds can be legally and politically difficult, as Draghi will have to choose which countries' bonds to acquire, while central bank's founding treaty forbids it from providing financial support to governments. Nevertheless, last week's comments made everyone really excited, while EUR/USD finished the week at a five-week low, providing a short-term weakness for the single currency.
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