ECB Roadside assistance, AAA cant help
Two European Central Bank (ECB)
meetings are coming up and traders should take note. The first is a meeting on January 7 on
non-monetary policy, the other a very important meeting is on the monetary
policy followed by a press release, and a maintenance period that will last
until March 10 to guarantee that the appropriate funds are available for those
decisions. Statements and leaks have
indicated that the ECB is going to use Quantitative Easing (QE) to purchase an abundance
of government bonds. Alternatively, they
would have the central banks purchase so the country or countries individually
would take on the risk of amount borrowed or owed separate from the interest. They could buy bonds that are AAA rated these
have little to no risk of default. The
AAA rating is issued by credit rating agencies; these bonds have the highest
creditworthiness and guarantee liability.
Only four companies were left with an AAA rating after the financial
crises in 2008. It seems over and over we see failed attempts on monetary expansion
and all the monetary measures have been used up. They keep trying to offset
deflation by printing and borrowing while weakening currency and eroding the
economy.
The ECB
declined to comment, however Peter Praet, ECB chief economist had made many
indications that these options are what is being considered. The Prospect of
more QE has the EUR/USD dropping searching for any support. Wall street is
feeling the impact hitting the biggest fall in the last three months. Commodity
currencies also felt the panic, and U.S. treasury yields fell, many
found a safe haven in the USD and JPY. Between the ECB meetings and the low
numbers from Germany and possible
withdraw from the Euro by Greece,
the Euro has a long road ahead.