European Central Bank President Mario Draghi has done it again. Let us forget LTRO’s and negative interest rates – Draghi is telling the markets that no matter how good the data appears in Germany that Europe is is suffering and that he is willing to control the currency and economy in any way available in his arsenal. In his speech he mentioned that real GDP in Euro zone remains unchanged and subdued. The new changes are outlined and include new asset buying programs. Mario Draghi had the following to say about the major changes ahead:
“The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities (ABSs) with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase programme (ABSPP). This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter, as decided by the Governing Council in June. In parallel, the Eurosystem will also purchase a broad portfolio of euro-denominated covered bonds issued by MFIs domiciled in the euro area under a new covered bond purchase programme (CBPP3). Interventions under these programmes will start in October 2014″
We are strongly bearish on the EURUSD and do not see a need for the bears to worry until numbers reach 1.2842 which is July’s low. There is only a weak need to relax the bears there as we are expecting to see numbers guiding far low and hitting August 2013 lows around 1.25 zone before the year is out.