ECB beats market expectations with huge stimulus plan

Investors were finally delivered what they had been waiting for, at the European Central Bank’s (ECB’s) monthly press conference on Thursday, January 22nd. The ECB’s president, Mario Draghi, unveiled plans for a quantitative easing plan that will see the bank buying 60 billion euros worth of assets per month - starting March and ending September 2016 - that at conclusion will exceed one trillion euros in total.

A stimulus plan had been widely anticipated for some time, however, the size of the asset purchase scheme took investors unawares and sent the euro tumbling to a fresh 11-year low.

EUR/USD touched its lowest level since September 2003 on the news, setting the pair up for its sixth consecutive week of losses, having recorded a nine per cent decline since early December.

The euro also declined versus the UK pound and the Japanese yen.

EUR/GBP plummeted to a new seven-year low to break below the psychologically significant 0.7600 barrier, where it continues to range.

EUR/JPY slides towards an 18-month low as euro weakness prevails against the yen decline. Both currencies have been hit by recent central bank moves, but the euro’s decline is outpacing that of the yen.

The euro lost out against most other major currencies in the wake of the ECB’s announcement as markets prepare for a flood of new euros.

Risk appetite has returned and a general upbeat tone has swept markets, driving European shares higher for their seventh consecutive session and setting them up for their best winning streak since 2011.

The Eurostoxx 50 index added around 1.5 per cent by lunchtime, Germany’s DAX was around 1.4 per cent higher and the French CAC 40 climbed almost 1.5 per cent.

However, there remains a note of uncertainty surrounding the Greek general election, which is scheduled to take place on Sunday, January 23rd. We can expect some volatility on Monday if the anti-austerity party, Syrzia, takes control of the heavily indebted nation.