ECB lower interest rate and announce restarts open-ended QE
Bloomberg reports WH to prepare for Interim deal with China - later denied by CNBC
A tricky day out there today, after the ECB cut deposit rates by 10bbp (as expected), announced the resumption of "open-ended" QE (dovish surprise) at the pace of 20bln of APP per month (rather than 30 bln as previously expected). The Bank announced also the introduction of a two-tier system which will exempt bank from negative rates for 6 times more the level of required reserves (Swiss model). The overall reaction in the market was digested as mainly dovish, however, the following price action was considerably choppy, after conflicting comments on US-China trade hit the wire. In fact, as an initial report by Bloomberg suggested the possibility of an Interim with China, the news was later denied by CNBC. Net net, Equities remain around recent highs with SP500 above the 3000 marks, whereas Gold bounces back above the 1500 level supported by the dovish surprise and mild risk-off tone following the CNBC denial on China. Perhaps a bit of overreaction to the upside perhaps in the EURUSD which went quickly to pair back losses after Draghi announcement of the ECB bazooka. Interesting reaction in Treasuries which came under pressure, after an initial spike higher. Find below the details of the ECB package of unlimited QE, lower reserves requirements for Banks and negative deposit rates.
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