Strategy Video: The ECB Decision Can Impact More Than the Euro

Talking Points:

• In a market already turbulent with volatility, event risk like the ECB decision can generate huge swells

• Given downgraded growth forecasts and recent global policy accommodation, January QE looks the consensus

• The impact of the ECB's policies will reach beyond the Euro and Euro-area capital markets

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As we head into the ECB rate decision, the consensus is for a fresh round of accommodation in the form of stimulus. However, rather than anticipation, the market's mood may be more accurately described as that of anxiety and desperation. Not only has the Euro tumbled in the lead up to a suspected QE-like program, but European capital markets (like equities and government bonds) have surged in anticipation. Disappointment here could leverage more than short-term rebound on the Euro. What's more, given the fragility of the global financial system; the ECB's inability to take the reins on financial support could trigger a global landslide. What are the expectations the market is working with, what scenarios should we be wary of and how will the market's respond? That is the focus of today's Strategy Video.

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