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BDSwiss | January 17, 2017

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The price rally of the ECB - BDSwiss

The price rally of the ECB
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The European Central Bank (ECB) is responsible for the latest price rally on the stock markets. Not even the Brexit, Donald Trump’s election or the political crisis in Italy had as much of an impact at the ECB’s most recent decision.

The Background

The failed constitutional reform in Italy has plunged the country and political Europe into a deep crisis. Minister President Matteo Renzi is now gone. However, the players on the market had apparently already expected this and positioned themselves accordingly in the previous week. Therefore, the reaction in the markets was relatively mild. In addition, Austria somewhat surprisingly elected at pro-European candidate for the Federal President. These were, of course, very welcome news for the stock markets. In the euphoria about the election, the ECB still put a top priority on it and confirmed at their press conference that interest rates will remain so low for undetermined time. Additionally, the ECB decided to extende the QE program until the end of 2017.

The ECB price rallyezb-bdswiss-small

This decision by the ECB ensured a good mood on the financial markets. The German stock index is now trying to reach a new record high. The question now remains if this newest price rally will continue or if a turn around is looming. One thing is clear, the course of the ECB is not really sustainable. The European Central Bank is directly involved in the European Union’s economic cycle. Of course, the markets look forward to fresh capital. But the fact that the ECB is pumping more and more money into the markets through the purchase of bonds also increases the volatility of the prices. Investors can benefit from this with dynamic products such as binary options or CFDs. However, this also increases the speed in the markets, so it is now vital for investors to track the news situation closely so as to be able to benefit from short-term leverage.

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