Will The ECB Ease In January Or March?

Investors are eager for more clues about the European Central Bank’s plans for next week’s policy meeting. The bank has been hinting at the possibility of a large scale quantitative easing program for months, saying that the governing council is willing and ready to intervene if need be. With the nation’s consumer price data showing that the eurozone has fallen into a period of deflation, many believe that January’s meeting will end with the bank announcing a new asset purchase plan.

Greek Uncertainty

Three days after the ECB is set to meet, Greeks will head to the polls where they are expected to elect the radical Syriza party into power. Syriza leaders, who have been leading in the nation’s popular opinion polls, have promised to abandon the nation’s bailout program early, which many believe would lead to the nation’s eventual exit from the currency union.

With so much uncertainty at play, investors are wondering whether the ECB will hold off on more stimulus in January to see how the vote unfolds. A delay in quantitative easing is very possible according to some analysts who believe the bank may also need more time to figure out how to implement a wide scale easing program within the nation’s fractured bond market.

What Will It Mean For The Euro?

With the euro currently trading near nine year lows against the dollar, its likely that the ECB’s quantitative easing strategy is already priced in. Even if the bank surprises on January 22 and holds off on more stimulus until March, a clear forward guidance message will minimize the impact on the euro.