Draghi Makes U-Turn in Monetary Policy; Euro Drops

President of the European Central Bank (ECB), Mario Draghi, stunned financial markets last week by announcing a U-turn in the Eurozone’s monetary policy. Instead of a long-awaited rate hike, Mario Draghi announced on the contrary a new monetary stimulus package. The Italian, among other things, pulled an old trick out of the ECB sleeve (the so-called TLTROs), mere months after the European version of quantitative easing was brought to a complete stop.

But it should be very clear to close observers what really is happening: Mario Draghi will step down in October this year and wishes to avoid a renewed recession and/or financial panic at practically all cost during his term. And since the ECB lowered its economic forecast for 2019 from 1.9% GDP growth to a mere 1.1% growth, it seems that the odds of a European recession in the short run are on the rise.

As a result, the euro weakened against the dollar (EURUSD at 1.12), the rate on German bonds fell sharply and gold prices barely moved. Gold prices, however, already fell below $1,300 dollars per troy ounce earlier this month.

Draghi Caused an Unintended Effect

ECB Brings TLTRO Back to Life

Beware of Italy


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