HSBC Say ECB Increase of QE is Unlikely

HSBC have said in their latest euro area economics report, that its improbable that the European Central Bank’s (ECB) quantitative easing (QE) programme, will be extended at the policy meeting in Frankfurt on March 10.

This is despite the promise made in January by ECB President Mario Draghi, that the governing council of the bank would, “review and reconsider our monetary policy stance”.

HSBC said that the EUR60 billion of asset purchases per month QE programme will not be prolonged, due to the technical constraints that are involved.

At the March meeting, the ECB could tamper with the existing conditions the bank said, by expanding to 50% from 33% the issuer limits on bonds, without collective action clauses.

Furthermore, HSBC argued that there was the potential to drop the yield floor on purchases, which is currently set at the deposit rate of 0.3%, the rate it was reduced to in December.

These stipulations, if they come into effect, could forage a path for the programme can be expanded at a later date, easing the markets’ disappointment.

Although HSBC said that even if these changes are made, and are effective, it would still not be enough to increase the programme above the current EUR 60 billion per month level.

If the monthly asset purchasing rate rise by a significant level, then the would escalate risk of running out of assets to buy.

Unless the ECB was willing to expand their risk asset purchases in investments such as corporate credit.

HSBC concluded that the recovery is on track, even though they expect the ECB to revise down their inflation risks next month.

Regional GDP Data Released by the EU

Throughout 2014, regional GDP has ranged from 30% of the EU average in the Bulgarian region of Severozapaden, to 539% of the average in the Inner London – West area of the United Kingdom.

After the inner London region, the leading areas in comparison to the EU average, were the Grand Duchy of Luxembourg on 266% above the average, followed by Bruxelles/Brussel in Belgium 207%.

Then came Hamburg in Germany on 206%, Inner London – East in the United Kingdom 204%, and Bratislava in Slovakia 186%.

In total, there was 21 regions which were above the GDP 50% per capita.

Five of them were based in Germany, three each in the Netherlands and the United Kingdom, two in Austria, one each in Belgium, the Czech Republic, Denmark, Ireland, France, Slovakia and Sweden, as well as the Grand Duchy of Luxembourg.

In contrast, there was 21 regions who were below the 50% of GDP average, each were in Bulgaria, Poland and Romania, four in Hungary, and one each in Greece and perhaps more surprisingly France.

Euro Rises and Falls Against the US Dollar

The euro has had a turbulent relationship with the US dollar this morning GMT, climbing to $1.106, before falling to $1.101.

In a similar pattern, against the pound, the euro has fallen to buying £0.78, down from £0.792 at 6AM GMT.