Forex Flash: All eyes on ECB conference Thursday – UBS

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FXstreet.com (Barcelona) - It is fair to say that the latitude for purchasing under the new program will largely determine the euro's reaction at the ECB's press conference on Thursday. Draghi has previously made it clear that only the short-end of the curve would be targeted, though this still leaves plenty room for interpretation.

According to Research Analyst Gareth Berry at UBS, "The further out along the curve the ECB goes, the more the euro will benefit, at least on the announcement effect. However, the desire to avoid accusations of monetary financing will likely impose some upper limit on which maturities are declared eligible, as will the need to circumvent issues around the ECB's seniority."

Until the question of seniority is satisfactorily addressed however, private-sector bondholders are unlikely to see the ECB as a partner in the bond markets, and this issue ultimately limits how euro-positive the bond-buying program can be. It's worth noting that, although Draghi referred to the possibility of buying out to three-years, other options are still on the table. He spoke of buying bonds with maturities "of up to one year, two years, or even three years", so clearly the details are yet to be decided.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Forex and Currencies

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