The European Central Bank (ECB) announced the end to its quantitative easing program at the end of 2018. They trimmed the amount of monthly bond purchases from €30B to €15B earlier this year and now the program will end. The ECB will continue to reinvest cash proceeds for a period of time to keep borrowing costs low. The ECB’s QE program was introduced in March 2015 and it has purchased more than €2.6T euros since inception. This move was telegraphed and widely expected although the region’s negative interest rate policy will likely remain unchanged for the foreseeable future. The eurozone is dealing with Italy’s budget woes, political turmoil and rioting in France and renewed uncertainty over Brexit. The eurozone economy continues to exhibit weakness with slowing PMIs and lackluster GDP growth. We believe ECB tightening seems increasingly unlikely.
May survives, but Brexit uncertainty hurting sentiment & theTheresa May survived a key no confidence vote this week from her conservative party although she has signaled her desire to step down as Prime Minister when her term ends in 2022. The major sticking point is the border and customs union between the U.K., Ireland and Northern Ireland. The U.K. seeks more assurances from the EU that they will not get stuck in the customs union indefinitely while the EU has concern over political chaos and uncertainty in the U.K. Conservatives in the U.K. are increasingly concerned that the current deal is a sort of junior EU membership where they are subject to many of the rules without an ability to participate in decision making. Theresa May and other EU leaders are attempting to break the impasse and the uncertainty will likely continue to weigh on sentiment and the British pound.
