Macro Outlook
Disappointing. After much talk over the past several quarters about the willingness of the European Central Bank (ECB) to use unconventional tools to support their economic recovery, the first opportunity to show bold action fell short. At this point, the announcement of purchases that will occur over two years is not what investors are waiting to see. Commitment demonstrated through the size of the program is what is wanted. The press conference in September intimated that going back to 2012 levels is in the cards – that suggests €1 trillion of purchases. Nobody expects that out of the gate, but at least give an indication of progress. What’s a few hundred billion euro amongst central banks? Instead, we are still left with ambiguity and deteriorating credibility on behalf of the ECB President Mario Draghi to cut through the bureaucratic tape. Perhaps the recent headline that a third dissenter in his group shows that he is having difficulty getting the votes needed. Well, the currency still has faith. After a little bit of a bounce in the EUR/USD exchange rate, on Friday it continued its decline. Maybe the currency markets see the inevitable – a weaker currency is one of the levers that needs to be pulled eventually to restore export competitiveness.