ECB ‘Bazooka’ Extended – Will Buy EUR 60 Billion Per Month Until At Least December 2017

The ECB’s ‘Bazooka’ is back and ‘Super Mario’, the European Central Bank’s monetary magician did not disappoint QE addicted markets yesterday by extending ultra loose monetary policies and quantitative easing until at least December 2017.

The euro fell and gold rose 1.1% in euro terms from €1,090/oz to €1,102.85. Stocks globally moved higher, and European stocks look set for their best week since February, supported by the extended ECB currency printing and a calm, some would say complacent and irrationally exuberant, reaction to the Italian referendum.

Despite the recent sell off in gold, it remains 13% higher in euro terms in 2016 –  10% higher in dollars and 30% higher in pounds.

Gold in EUR (YTD 2016)

The ECB somewhat surprised markets by extending its bond-buying ‘stimulus,’ but at a lesser amount – reduced from €80 billion to €60 billion. The ECB tapered despite Mario Draghi categorically insisting that there was “no question” of ECB tapering.

The decision helped send Wall Street to fresh record all time highs, as investors decided the ECB was signaling an extended period of even looser monetary policy. Draghi had previously signaled that QE would continue until next September.

However, the ECB warned that if the outlook becomes less favourable they will increase their bond buying programme. They said that may increase the size and duration of the programme if needed.

Given the scale of the political, economic and systemic challenges facing the EU – including the coming Dutch, German and French general elections – this seems likely.

Although, not if the voice of monetary prudence has its way. The German Bundesbank chief Jens Weidmann voiced concerns. The president of the Bundesbank did not agree with the decision to extend its bond purchases according to German newspapers.