The European Central Bank recently announced that it will be engaging in a 60B Euro purchase of bonds. The Euro has depreciated more than 12% since the beginning of the year and is at its lowest point in over a decade. The fall will help exports, and will help stave off depreciation. The bonds that The European Central Bank are being forced to buy are valued at below -0.2%. One might think that such low yields would deter non-governmental buyers, however some buyers are forced for regulatory reasons to hold bonds; however, low yields are attractive to no one and investors will undoubtedly move elsewhere to place their funds.
Meanwhile…in the US the Fed’s moving to increase rates. After a two-day meeting, the Fed agreed to drop “patient” from its monetary-policy statement, meaning that it will likely raise rates from their rock bottom lows for the first time since 2008. With unemployment lower and economic expansion looking solid the consensus is for an interest rate rise. Higher rates in America will mean that more investment will come back to the states and consequently the dollar will likely appreciate even more relative to other countries hurting exports; the latest data show manufacturing output falling by 0.2% and car output falling by 3%.