more currency to the system (to create inflation), these moves make it less attractive for global investors to park money in Europe.
The lack of demand and increased supply should cause a decline in the euro.
But since the announcement this week, the euro has actually gained strength!
It’s not easy to see on this 10-year chart, but the euro experienced a strong rally of 1.2% during the day of the meeting. Speculators seem to think Draghi is losing the battle against deflation.
Let’s watch the euro to see if it breaks back and holds above that downtrend line. If it does, the move would have deflationary implications and Mr. Draghi will need to invest in Rolaids.
Related: Vanguard FTSE Europe ETF(NYSEARCA:VGK), iShares MSCI EMU Index (ETF)(NYSEARCA:EZU), iShares MSCI Germany Index Fund (ETF)(NYSEARCA:EWG)