Market Overview

Euro Responds To Federal Reserve Conclusion

Euro Responds To Federal Reserve Conclusion
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The euro fell markedly lower on Thursday after the U.S. Federal Reserve finished tapering its $85 billion-per-month quantitative easing program on Wednesday. The common currency traded at $1.2572 at 8:00 GMT as confidence in the U.S. economy helped push the dollar higher.

At the close of its two-day policy meeting, the Fed announced that it had withdrawn the final $15 billion worth of bond buying and finally exited the markets. Though the bank is looking to return to normal policy and allow the U.S. economy to stand on its own, Fed officials reassured investors in their forward guidance that the bank would maintain low interest rates for a “considerable time.” Most investors are expecting the bank to hold off on a rate hike until mid-2015.

Meanwhile, the European Central Bank is being pushed in the opposite direction as many EU policy makers call for the bank to do more to boost the region’s flagging economy. Some argue that the eurozone needs a quantitative easing program like that seen in the U.S., but many of the region’s central bankers claim that a large-scale bond buying program is not the answer.

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The Wall Street Journal reported that ECB Governing Council Member Ardo Hansson told the paper that the bank needs to hold off on further stimulus until the effects of the previous months’ easing packages can be measured.

Earlier this month, the bank began buying covered-bonds and pledged to start buying asset-backed securities later in the year. Though there has been speculation that the bank will expand its purchases to include corporate bonds, Hansson said he was hesitant to do so until the effects of the current stimulus have been given time to take effect. His calls echo those of Germany’s finance minister as well as several other northern eurozone nations who would prefer to hold off on stimulus to give the economy a chance to rebound.

Posted-In: European Central BankNews Eurozone Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga


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