Quantitative Easing Forces Euro Downward

B y w w w . F o r e x C o n s p i r a c y R e p o r t . c o m
Quantitative Easing Forces
Euro Downward

http://www.forexconspiracyreport.com/quantitative-easing-forces-euro-downward/
The Euro is having its fair share of
problems these days as the currency
fell to its lowest against the US dollar
in nine years.

The root cause of this slide is the
prospect of substantially lower
interest rates over the longer term in
the Euro Zone.

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Before We Continue…

The US Federal Reserve saved the day
in the USA with its bond purchases to
the tune of $85 Billion each and every
month.

This served to drive interest rates
down and provide credit to a
floundering financial system.

The EU opted for austerity measures
reminiscent of the approach the USA
took and the 1928 market crash.

Those measures led the USA and the
rest of the world into the Great
Depression.

Luckily for the USA the head of the
Fed at the time of the 2008 was Ben
Bernanke, an expert on the causes of
the Great Depression.

It may be a bit late but the EU is
finally pursuing the course that pulled
the US economy out of the doldrums.

The problem for the Euro is that
quantitative easing forces the Euro
downward as a result of lower interest
rates.

Lowest in Nine Years

As noted in MarketWatch the Euro is
at its lowest level in almost 9
years.

The euro fell to its lowest level in
almost nine years against the dollar
on Monday, amid speculation the
European Central Bank will soon
expand its stimulus programs aimed
at avoiding deflation as the region’s
economy struggles to grow.

Analysts say ECB President Mario
Draghi is under pressure to take
further measures like large-scale
purchases of government bonds, a
policy known as quantitative easing

Which could add around €1 trillion to
the central bank’s approximately €2
trillion-balance sheet.

This pushes yields down, which move
inversely to bond prices, and lessens
the attraction of the euro.

The central bank’s governing
council’s next monetary policy
meeting is in two weeks on Jan. 22.

“Time is running out for the ECB” to
announce further quantitative easing
measures, said Mitul Kotecha, head of
foreign exchange strategy for Asia
Pacific at Barclays in Singapore.

The firm forecasts the euro EURUSD,
-0.58% falling to $1.17 against the
U.S. dollar by the end of the first
quarter and to $1.07 by the end of the
year.

It appears that the Euro will continue
to fall as the European Central Bank
institutes much needed measures t
stimulate an EU economy that
threatens to slide back into recession.

And the Greek debt default dilemma is
not helping either.

Greek Elections

Elections are coming up this month in
Greece.

This is the country that has had to be
bailed out by the EU to prevent default
on their sovereign debts.

The standard recipe was applied. The
central bank gives you money and you
put your economic and political house
in order.

However, the austerity measures
applied have not been appreciated
in Greece where unemployment has
been well over twenty-five percent.

The Financial Post reports that the
possibility of Greece leaving the EU
concerns the powers that be, such as
German Chancellor Merkel.

A Greek exit from the euro area
would have “incalculable”
consequences and leave Germany
facing the biggest loss on European
financial aid extended to Greece, a
lawmaker in Chancellor Angela
Merkel’s coalition said.

“Europe can’t afford a Greek exit,”
Joachim Poss, the Social Democratic
Party’s deputy finance spokesman in
the German parliament, said in a
phone interview.

Suggestions by allies of Merkel that
the 19-nation currency bloc could
weather Greece’s departure amount
to “playing with fire at a fragile
moment in the stability of the euro
area,” he said.

The EU is stuck between a rock and a
hard place.

They need to pour money into a
stimulus program to prevent more
situations like the one in Greece and
they need to keep bailing out Greece’s
failing economy or see the start of a
possible breakup of the European
Union.

The Forex result of this will likely be
that the Greek dilemma and
quantitative easing will force the Euro
downward.

Trading the Euro

Bloomberg refers to the Euro’s Wild
Ride which is likely not yet over.

The euro is starting 2015 with a
tumble against the dollar, raising the
prospect that for a second year
analysts weren’t bearish enough in
their forecasts.

Falling as much as 1.2 percent today
and grazing $1.18, their target for
year-end, the euro touched its
weakest since March 2006.

Should it close below that level this
week, trading patterns suggest the
euro-dollar pair, the world’s most-
traded, could reach the 2005 low of
$1.1640.

It would appear that the downward
movement of the Euro is far from
over, quantitative easing or not.

Quantitative Easing Forces Euro Downward

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