The European Central Bank Will Play: There Is No Doubt That The Financial Market Will Usher In A Big Baptism.

Despite the political uncertainties of the US general election and Europe,

The economy has recently passed a positive signal.

The unemployment rate dropped to a 7 year low in November, and manufacturing activity accelerated, supporting the inflation outlook.

76% of economists predict that inflation will gradually rise to the target of Euro silver before the expiration of Delaki's term in 2019, that is, close to 2%, which will rise 66% compared with October level.

For Euro investors, a series of unusual signs of "historical curse" and "choice between ice and fire" undoubtedly indicate that tonight's paction will be extremely dangerous.

From the volatility point of view, before the European Central Bank resolutions this evening, the euro dollar exchange rate overnight options fluctuated sharply, and this time is no exception.

Ice and fire, spear and shield, extension and reduction, easing and tightening.

In the current financial market, if the central bank is to find the most contradictory feature of the central bank, the ECB may be the first to bear the brunt.

And tonight's European Central Bank's December interest rate resolution may be a concentrated catharsis under such an internal policy divergence.

While deciding whether to extend the QE deadline tonight, the other side will have to think about how to reduce the size of QE.

Tonight, Delaki, the governor of the European Central Bank, known as "super Mario", may need to make such a slightly divisive "choice of ice and fire".

The expectation of the European Central Bank on Thursday announcing the extension of its massive trillions of euro bond purchases is continuing to warm up, but at the same time, the ECB is still likely to consider reducing the size of its monthly purchases.

No matter which decision is finally announced, the financial market will undoubtedly usher in a big baptism.

What is more interesting is that investors with good memories may recall that the European Central Bank launched the euro dollar rally against more than 400 points on the day of last December meeting.

Up to now, the euro dollar trend in the past few months is almost the same as last year.

This can not help but cause endless reverie. Will the euro really copy the history of last year?

The ECB's monetary policymakers will hold a policy meeting this evening and will unveil the third stage of its quantitative easing plan.

But at the same time, the central bank is also facing a difficult choice: whether we need to slow down the pace of asset purchase plan.

So far, the European Central Bank has promised to buy 80 billion euros of government bonds by March 2017.

Analysts said that at Thursday's meeting, the central bank would make a choice between the following: in accordance with the current strength, the debt purchase plan will be extended for 6 months, or the size of the monthly debt purchase will be reduced, but the validity period will be further extended.

According to the financial times, there is no difference between the two options from the scale of debt accumulated by the European Central Bank. The ultimate debt size is between 2.2 and 2 trillion and 400 billion euros.

However, the size of the central bank's monthly purchases is very important.

The recent good economic performance in the euro area and the risk of exhaustion of assets under the QE plan will prompt the ECB to slow down its debt purchase.

However, even though the economic recovery has withstood the initial impact of the British referendum and the US general election, the eurozone economy remains fragile.

Moreover, political uncertainty also threatens the process of economic stability and recovery in the region.

Bloomberg has previously thought that tonight's ECB resolution will focus mainly on the following four points.

Among them, the decision and discussion of the European Central Bank's extension and reduction of QE is undoubtedly the top priority.

At present, the only thing that is certain is that the ECB's chances of adjusting interest rates tonight are almost zero.

Most economists surveyed by Bloomberg believe that the ECB President Delaki will announce on Thursday (December 8th) the extension of the current European Central Bank's debt purchase plan of 80 billion euros per month.

89% of the economists surveyed expect that the European Central Bank will announce new stimulus measures or extend the debt purchase plan after the monetary policy conference on Thursday.

Ben May, an economist at Oxford Economic Research Institute, estimates that the ECB will extend the current 80 billion euro / month debt purchase plan by 6 months.

The euro zone economy is growing at a healthy pace, and the key and core inflation rates will steadily increase in 2017. It is expected that Thursday will be the final sprint of the euro silver easing plan.

Deutsche Bank also believes that the European Central Bank will announce this week that it will extend the period of 80 billion euros per month for 6 months.

The implementation of this measure will help to promote the supply of qualified bonds in the market, make the yield curve steeper and improve the incentive pmission mechanism.

Although the ECB's QE extension is almost final this evening, there are different views on how to build a wide range of renewals and sizes, but this will undoubtedly become the biggest variable tonight.

Some people believe that a mere extension of 6 months will cost 80 billion euros per month.

There is no need to change, but it is also suggested that the size of the monthly debt purchase be reduced to 60 billion euros for 9 months.

The latter said that the simple extension of the deadline would be interpreted by the market as the relaxed plan never ends.

According to sources, the ECB may hint in the long-term outline that the debt purchase plan can not be extended indefinitely, but the size of the monthly purchase debt may be obscure, but based on the real time economic performance of the euro area.

Similar to the BoJ's yield curve control operation, Europe can set a maximum purchase limit of 80 billion euros per month, but it does not mean that assets must be purchased in full every month.

Bloomberg survey shows that more than 3/4 of respondents said that slow pace of inflation and a mild but stable economic recovery will provide space for Draghi, and by the second half of 2017, there will be stimulus reduction measures.

According to the strategist of BNP Paribas in Paris, the European Central Bank announced this week that the possibility of reducing asset purchases was reduced after the Italy referendum.

However, the ECB is more likely to change the forward-looking guidelines and send signals to the market that QE can not continue indefinitely in the current form.

Reuters pointed out that at present, the European Central Bank has fierce competition among hawks and pigeons.

No matter when the European Central Bank formally announces the reduction or termination of the easing plan, the European and global bond markets will surely have great waves. (investors may recall the market performance of the Federal Reserve when Bernanke announced the end of the Federal Reserve in 2014). In a sensitive moment when Italy's referendum vetoed the constitutional amendment and the European political vane may turn around, it seems unlikely that it will announce any plan to tighten its monetary policy at the moment, but this risk is still different.

88% according to the economists interviewed, although the current euro zone treasury bond yield raises concerns that the ECB's debt purchase program will be faced with "no debt to buy", extending the QE plan means that the ECB must adjust the parameters of its easing program.

Analysts pointed out that the ECB needs to make technical adjustments to its quantitative easing measures to expand the scope of bonds that can be purchased.

At present, the ECB's debt purchase plan includes only those bonds that yield no less than 0.4% of overnight deposit interest rates, and determines the scale of purchases of the country's bonds according to the proportion of countries' contributions.

Marius Gero Daheim, an analyst at SEB, Sweden, says the most effective and politically controversial option is to cancel the threshold of deposit interest rates for buying bonds.

This will release a large number of core and sub core state bonds, allowing the QE plan to continue until mid 2018.

In terms of revising the technical parameters of the debt purchase plan, Nomura believes that the ECB may announce the addition of the international securities identification number system (ISIN) and raise the upper limit of NON-CAC debt holdings from the current 33% to 45%.

In addition, the European Central Bank may relax interest rate restrictions on deposits, but Nomura believes that the current strategic interest rate level, the smooth implementation of the strategy is of less strategic significance.

{page_break}

The ECB needs only one target now: eurozone.

It must be lower than but close to 2% in the "medium term".

The so-called "mid-term" is actually a relatively vague concept of time, but the ECB has made it clear that the market and other economic people need to believe that the central bank has the ability to achieve its goals, which is important at one ten.

In the past, the ECB attached great importance to a technical index for measuring inflation expectations, the euro zone's 5 year inflation swap rate.

The interest rate shows that the market does not believe that the euro area inflation rate can reach 2% in 5 years.

However, the influence of this index is not as good as before.

Moreover, even if the ECB mentioned this indicator at a meeting on Thursday, its importance is likely to be much less than that of other indicators.

Some of the data show that market observers believe that the European Central Bank will eventually achieve a 2% inflation target.

At present, the most immediate concern of the market is whether the ECB will reduce the size of asset purchases.

Kathy Lien, chief foreign exchange analyst at BK Asset Management, said that if so, the euro / dollar may be faced with a massive crash.

Lien pointed out that the euro / dollar has risen from 1.05 to 1.08 in recent years, which has led to the withdrawal of some short sellers. However, last week's CFTC data showed that the size of the euro was still huge. Once the European Central Bank cut the size of the debt purchase of 80 billion euros a month, more short refunds may emerge.

Lien believes that at the moment, the ECB will not be able to reduce the purchase of debt. If it does, the euro / dollar may break through 1.08.

At several meetings this year, Mario Draghi, the European central bank governor, has been emphasizing the toughness of the eurozone economy, which explains why he is so optimistic.

However, Kathy Lien believes that this improvement is largely attributable to the weakening of the euro. If Delaki talks about reducing the purchase of debt, the euro / dollar will soar, which will reduce the positive contribution to price pressure.

Lien said that if Europe extended the QE implementation time for 6 months, and kept the size of the 80 billion euros purchase debt per month unchanged, and did not issue the statement of reducing the purchase of debt, the euro / dollar could fall 1.07 by investor disappointment.

But Jo de Raj sent a message about the reduction of debt purchases and reduced the size of the monthly debt purchase, and the euro / dollar could hit 1.09.

She also believes that even if the euro is sold, it is only a matter of time for the European Central Bank to withdraw from the QE strategy, and the euro / dollar will probably bottom out at 1.05 levels.

Shaun Osborne, chief foreign exchange strategist at Scotiabank, Canada pointed out: "I think the ECB is unlikely to take any tough stance in real terms. Despite accelerated economic growth, overall, inflation pressure and inflation expectations are still very weak. The ECB's responsibility is to bring inflation pressure and inflation expectations to their goals."

Osborne said that any future rally in the euro market may be a flash in the pan as investors focus on the acceleration of US economic growth.

In addition, Webb, chairman of the UBS and Axel Weber, warned on Monday that the European Central Bank would soon stop the quantitative easing (QE) initiative and start raising interest rates in September next year, and the market is unprepared for the central bank's pformation.

Webb said, "the US interest rate will go higher, the European quantitative easing policy will end, and investors have not yet prepared for the euro area bond yields to rise sharply, which is very dangerous."

Webb expects the European Central Bank to end its debt purchase earlier than many investors, pushing the euro area yield curve to a higher level.

He said, "a large portion of the market share a single orientation. In the middle of 2017, you will have to cancel some of those positions."

Felice, Lee Ferridge, managing director of DF global investment management, said that it is too early to judge the recovery of the euro. If the ECB did not hint that it would gradually reduce the size of the debt purchase, the euro would fall again, otherwise the euro would rise sharply; if the European central bank only announced the extension of QE, the pressure on the euro would be limited.

For more information, please pay attention to the world clothing shoes and hats net report.