Euro Steady As Investors Wait For ECB Bank Loans

The euro was steady at $1.2419 at 8:40 GMT as markets prepared for the European Central Bank’s second installment of targeted cheap loans for the region’s banks. Investors are watching to see how much the bank decides to loan for a better indication of whether or not it will roll out more easing early next year.

Over the summer, the ECB announced that it would offer a series of cheap loans to banks in order to boost lending throughout the region. On Thursday, a second round of those loans will become available, but a low volume would suggest that the bank is planning to begin a large scale quantitative easing program in 2015.

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Recent comments from several ECB officials suggest that the bank’s governing council is beginning to see the need for outright government bond buying; but on Wednesday, the Wall Street Journal reported that governing council member Ardo Hansson made contradictory comments during an interview.

Hansson said that he is uncomfortable with a large-scale bond buying program and that he thinks the best way to provide more stimulus is through the purchase of more corporate bonds. His remarks underscore the division within the bank over how to boost the region’s struggling economy.

At last week’s policy meeting, ECB President Mario Draghi said the bank was going to review its existing stimulus measures next year and decide whether or not more easing is the answer. The bloc is suffering from dangerously low inflation, with November’s figure at just 0.3 percent, making the bank’s decision about how to proceed complicated. Many see inflation continuing to fall in December and January due to the sharp decline in energy prices, something that could put more pressure on the bank to ease sooner rather than later.

Posted In: NewsEurozoneCommoditiesForexGlobalFederal ReserveMarkets
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