Announcement posted by de2 Communications 11 Mar 2016
“We’re seeing a follow through of the sell-off from yesterday,” said Gary Huxtable, client adviser at Atlantic Pacific Securities.
He said the reaction came after ECB’s better than expected stimulus measures went against many market participants’ expectations.
“While the ECB did cut rates, the accompanying statement created some level of negative sentiment,”
According to Huxtable, “This (negative sentiment) was evident with a 1% rise in gold price overnight, in addition to the sell-off on US dollar.”
Huxtable pointed out that while the initial reaction was bullish for both the Euro and equities, EBC president Mario Draghi’s comments regarding the low prospect of further rate cuts indicates one of two things.
“That either within the ECB they are beginning to understand the negative rates has little impact in a global economy of which the private sector is in a state of debt avoidance,”
“Alternatively, policy makers may be of the opinion that future policy easing may need to be presented to the market in an environment with lower market expectations, to provide positive asymmetry heading into future meetings,”
According to Huxtable recent policy makers in New Zealand and Japan have set such a precedent.
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