European markets rose sharply and the Euro sunk against the dollar and sterling, following the announcement that the European Central bank may well extend its current quantitate easing program.
Markets remained unchanged following the announcement to leave interest rates at 0.05% but Mario Draghi’s statement that the bank’s current policy would need to be ‘re-examined’ in December, caused the currency to devalue and equities to rally. The current QE program involves a EUR1.1TN bond buying scheme and is set to expire in September 2016 but given the stubbornly low levels of growth and inflation, the ECB has given its strongest hint to date that this program may well be increased. Whether this will involve increasing the pace purchases prior to the September date or a continuation of purchases afterwards, is not known at present. Draghi also suggested that the ECB was also considering further cuts to rates. The Euro hit its lowest level for three weeks against the dollar and sterling following the announcement.
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