ECB will keep policy easy for as long as it takes -Praet

The European Central Bank will keep monetary policy easy for as long as necessary, its chief economist says in an interview with a Belgian newspaper.

The ECB cut its deposit rate earlier this month and extended its asset-purchase programme in a bid to bring inflation in the eurozone, currently just above zero, back to its target of almost 2%.
The ECB “will pursue an accommodative monetary policy for as long as is necessary. Without giving a date, this timescale is fairly long,” Peter Praet, who is also a member of the Bank’s executive board, told La Libre Belgique.

“Additional risks have arisen from the slowdown in the emerging countries, risks that are pretty significant for the euro area. There are also downward pressures on prices in the manufacturing sector as a result of surplus output and the very high unemployment level,” he says.

He added, however, that the ECB cannot act on its own and governments also need to do their part, implying that at present they are not doing so.

“People expect too much from the ECB, if other actors rein in their efforts whenever we take action,” Praet said. “We are seeing less of an effort on the public finance side.”

First published here: http://news.markets/bonds/ecb-will-keep-policy-easy-long-takes-praet-7165/

Euro to hit record lows next year, BBH says

Currency strategists at Brown Brothers Harriman, the New York-based private bank, have repeated their prediction that the euro will test its historic lows next year. The currency’s weakest point so far against the dollar was the $0.6444 level touched in February 1985.

What seems to scare investors in the euro is not the suspension in response to the current flow of refugees into Europe of the Schengen Agreement, which abolished many of the EU’s internal borders, enabling passport-free travel between countries. It is a National Front victory for the French presidency, which alone could tear Europe asunder, write Marc Chandler, global head of currency strategy at BBH, and his team.

“And when placed in a larger context, the changes in Europe over the next few years is particularly concerning. The changes could include the UK leaving the EU, a post-Merkel Germany, and perhaps Weidmann succeeding Draghi at the helm of the ECB,” they write.

Jens Weidmann is currently president of the German Bundesbank and a member of the governing council of the European Central Bank, headed by Mario Draghi.

Our bearish outlook for the euro is not predicated on this dystopian scenario, add Chandler and his team. Instead, their “expectation that before the Obama dollar rally is over, the euro will test its historic lows is based on the prolonged divergence of monetary policy and the magnitude of that divergence well into 2017,” they write.

The strength of the dollar since Barack Obama became US president in January 2009 has weakened the euro from around $1.40 to its current level close to $1.10.

Source: Thomson Reuters

“We recognised the conflicting capital flows and did not expect parity to be seen this year. We do expect to see it next year and anticipate the cyclical low in 2017 or 2018. We see the political considerations discussed here as additional weights on the single currency’s outlook,” write Chandler and his team.

Originally published here: http://news.markets/forex/euro-to-hit-record-lows-next-year-bbh-says-6554/