All trading involves risk. Losses can exceed deposits.

ECB look ahead – so much work, so little impact?

As the European Central Bank gears up for its latest decision, we look at the current run of data and potential market implications.

All trading involves risk. Losses can exceed deposits.

It is remarkable to think we are nearing the original end date for the European Central Bank’s QE programme, and yet there has been very little improvement in the eurozone’s overall economic position. Indeed, with the German economy looking peaky we might even have gone backwards in economic growth terms.

The ECB has seen its stock of eurozone assets pass the €1 trillion mark, a remarkable milestone (couldn’t it have just bought Greece?), although the real total probably nears €1.4 trillion once Greek bonds are thrown into the mix. Now the programme is set to continue to the end of next March, with the €60 billion monthly purchases now increased to €80 billion. The most recent growth figure was 0.3%, actually below the 0.4% of the last quarter of 2014, and with growth forecasts set to be revised down yet again the scale of the problem becomes painfully clear.

Recently Mario Draghi noted the economic weakness, and also warned the strong period (if you can call it strong) of job creation could be coming to an end, adding that it looks like the economy is losing rather than gaining momentum.

Inflation is also seemingly absent for the eurozone, with the official rate at 0.2% versus a 2% target, and with oil weaker again this might fall yet further. QE was supposed to be inflationary, and while examples of rising prices can be found the overall picture points to a firm failure for this part of the policy.

It seems likely we will get an extension to the QE programme beyond March 2017, perhaps on the quaint basis that doing more of a failed policy will eventually lead to success. Hints of more easing, perhaps even of outright equity purchases, could come through too. However, with the euro on the verge of turning higher versus both USD and GBP after weeks of declines Mr Draghi will need to pull something big out of his hat.

EUR/GBP price chart
EUR/USD price chart

With the dollar weakening, we may continue to see a move into equities, but a rising euro might not spell good news for the likes of the DAX. Non-farm payrolls and other poor US data have arguably done much to help make stocks more attractive, especially as worries about a US rate move continue to decline. Yet the DAX has run out of steam below 10,800 lately, and while a post-ECB dip could see buying we need to have some more good news to get the post-summer rally started in earnest:

WATCH: have central banks lost control?

DAX price chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts


  • Leverage and margin

    In this section we introduce our trading platform and illustrate the ease with which you can trade CFDs on a wide range of markets. We also cover features such as stops and limits and explain how trading with leverage works.

  • Benefits and ways to trade

    Find out how exchange traded products (ETPs) combine the best qualities of various investment vehicles. Learn about the different types of ETPs and the diverse range of markets you can trade on.

  • Introduction to leverage

    Learn how you can use leverage to gain a large exposure to a financial market with a relatively small initial outlay. Leverage can magnify your profit, but we explain that it’s important to use it with care, because it also increases your risk of loss.