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Jakobsen: The ECB will act when the world doesn't need it

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What will we see this week from the European Central Bank?  All eyes are on President Mario Draghi as speculation grows over what he and his team will or won’t do to stimulate the struggling Eurozone economy.   

Saxo’s Steen Jakobsen believes interest rate cuts are inevitable.  But he warns that with an increased risk of deflation or disinflation, that will be too little too late.   Jakobsen also expects banks to face negative deposit rates.  However he says: “We have to remember that when we are zero bound the rules of gravity of the financial market disappear.”

And what else should we expect?  There’s been much talk about Quantitative Easing (QE), but Jakobsen says this is hard to achieve across the fragmented market.  Instead he believes the ECB will pay lip service to QE in the form of securitisation as well as focusing on SMEs.

As for the effect Thursday will have on the EURUSD, Jakobsen warns there will be some disappointment.   In conclusion, he believes the ECB will be able to wait another three months before they do anything.  “As per usual they will act exactly when the world doesn't need it."