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Jakobsen: The crisis building up for the ECB
There's growing evidence the European Central Bank is moving towards another crisis driven by deflation, emerging markets and a lack of growth. That's according to Saxo Bank's Chief Investment Officer, Steen Jakobsen. He says the central bank will do everything it can to "save the world" for the next couple of months without addressing the fundamental problems in the eurozone. Any emergency measures, he says, are highly unlikely to have an impact on the long term ability of the economy to recover.
Steen says suggestions the ECB will end the "sterilisation" of its sovereign bond purchases, where it moves money out of the banking system to offset its bond holdings, is "QE by the back door". Normally, he says, this would be against the ideals of the EU treaty and also not what the Bundesbank would ordinarily want. While he's often sceptical of such rumours, Steen says from a political point of view, such a solution would be the "least evil".
Steen says there are two potential trades here. The longer term one is to sell euro dollar. He also says it could be worthwhile buying some DAX calls in the very short term. It's a risky move, he says, but if the bond sterilisation rumours gain tration, there could be some good opportunities.
02:32 minutes
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