

Market Analysis
The European Central Bank (ECB) should primarily use quantitative easing (QE) programs during crises, despite potentially higher associated costs compared to other available tools, as argued by ECB Executive Board member Isabel Schnabel.
In a recent speech in Tokyo, Schnabel emphasized that asset purchases can be potent during financial market turmoil but stressed the need for careful evaluation outside such periods. She highlighted that the effectiveness of QE in boosting aggregate demand varies with economic conditions and cautioned that the costs of QE could outweigh its benefits compared to other policy instruments.
Since 2015, the ECB has deployed substantial asset purchases, particularly during the Covid-19 pandemic, accumulating around €5 trillion ($5.4 trillion) in mainly government debt. Policymakers began scaling back these holdings in 2023 while concurrently increasing interest rates to manage inflation. This reduction will accelerate mid-year as reinvestments from pandemic-era holdings conclude.
Recent ECB policy adjustments include maintaining the current interest rate framework while granting banks more flexibility in managing their required liquidity levels. A new "structural" bond portfolio is under consideration but details are pending finalization.
Looking ahead, the ECB plans a review of its monetary policy strategy next year, which may include reassessing its approach to QE. Schnabel highlighted two key lessons from recent experiences: the need for patience in achieving inflation targets near zero bound scenarios and the benefits of minimizing QE costs by using it selectively and ending it promptly, citing examples like the ECB's commercial paper purchases in 2020 and interventions by the Bank of England during the LDI crisis.
In addition to asset purchases, Schnabel noted the efficacy of measures like targeted longer-term refinancing operations (TLTROs) in supporting the economy during disinflationary shocks, given their more reversible nature in changing conditions.
In financial markets today, the USD/CHF pair weakened to 0.9120 early in the European session, driven by selling pressure on the Greenback amid cautious market sentiment ahead of upcoming GDP data releases from Switzerland and the US.
OVERVIEW | |
---|---|
Today last price | 0.912 |
Today Daily Change | -0.0017 |
Today Daily Change % | -0.19 |
Today daily open | 0.9137 |
TRENDS | |
---|---|
Daily SMA20 | 0.9099 |
Daily SMA50 | 0.9076 |
Daily SMA100 | 0.8903 |
Daily SMA200 | 0.8884 |
LEVELS | |
---|---|
Previous Daily High | 0.9154 |
Previous Daily Low | 0.9132 |
Previous Weekly High | 0.9158 |
Previous Weekly Low | 0.9079 |
Previous Monthly High | 0.9195 |
Previous Monthly Low | 0.8998 |
Daily Fibonacci 38.2% | 0.9141 |
Daily Fibonacci 61.8% | 0.9146 |
Daily Pivot Point S1 | 0.9129 |
Daily Pivot Point S2 | 0.912 |
Daily Pivot Point S3 | 0.9107 |
Daily Pivot Point R1 | 0.915 |
Daily Pivot Point R2 | 0.9163 |
Daily Pivot Point R3 | 0.9171 |
Paraphrasing text from "FX Street" all rights reserved by the original author.