The cycle has gone full circle over the last few years, usually when we hear the term QE (Quantitative Easing) its in reference to the FED (US Federal Reserve). That ship has begun to sail and now all eyes will be on Mario Draghi and his band of merry men to put the finger on the trigger and give the green light to the printing press. Mr Draghi has and continues to be a very clever man with his words and it has resulted in him being able to fend off QE until now, however things are entering dangerous territory in the Eurozone and this time more than words is required.

The consistent flow of negative data out of the Eurozone some members worse than others has brought the fear of ‘Deflation’ into the marketplace. The inflation rate is creeping down from where it should be 2% (ECB Target) and its now hovering around the 0.3% level. In recent research provided by ‘la Caixa’ it highlighted that excess liquidity in the EU is drying up, which is not a good sign. The ECB is offering banks a first tranche of its TLTRO’s on the 18th of September following that by another offering in December. Analysts have begun suggesting that we may see QE before year end.

What will happen when the Eurozone printing press opens its doors?

When and at this stage it is only a matter of time Mr Draghi commences QE it will inevitably put pressure on both the Euro currency and Eurozone bonds. We would imagine that bond yields will start to rise as we witnessed over in the US. The Euro currency is going to lose its strength against some of its major currency pairs, which we have already begun to see. ( Making holidays to the US that bit more expensive).

How should we play the Eurozone QE campaign?

QE is a very real and almost certain likelihood from the ECB its only a matter of when and how much. But there is plenty of scope to benefit from this action by sticking to the three below frameworks;

1. The EUR is going to become weaker against other currency pairs (Sell EUR)
2. Sell Eurozone bonds for US bonds
3. Eurozone equity markets should continue higher off the back of any money printing.