ECB Open To Expanding Its Bond Buying Program

The euro was steady at $1.2707 on Wednesday morning after falling considerably on Tuesday on speculation that the European Central Bank may expand its bond buying program. The common currency has been under pressure recently as poor economic data coupled with the ECB’s easy money policies drove it downward.

On Monday, the bank began buying covered bonds like mortgages as part of the ECB’s September stimulus plan. While the bank’s bond buying plan doesn’t have a specified target or limit, Draghi said in September that the ECB was looking to expand its balance sheet to levels seen back when the financial crisis began.

However on Tuesday, the Wall Street Journal reported that the ECB may consider expanding its purchases to include private sector assets if need be. The bank has been struggling to implement stimulus measures that have an impact on the bloc’s stalling economy, and has expressed willingness to consider aggressive easing tactics.

Recent data from the bloc has shown that several of its largest economies could slip back into a recession and that inflation is still dangerously low. The latest figures showed that eurozone inflation had fallen to 0.3 percent, a far cry from the bank’s 2 percent target and in what the bank has termed “the danger zone”, below 1 percent.

The ECB isn’t expected to expand its bond purchases any time soon as the bank will likely wait to see how the current measures impact the economy in the months to come. Despite that, European markets responded with sizable gains while the euro sunk as investors took the fact that the bank is considering such a move as a good sign.