Investors Await Draghi's Plan to Save the Eurozone

 
on April 04 2013 8:31 AM
ECB Draghi 2012 2
ECB President Mario Draghi. Reuters

The euro traded steadily near $1.28 on Thursday morning ahead of the European Central Bank's monthly policy meeting. The commodity traded at 1.2799 at 10:35 GMT as investors speculated about the bank's plans for the rest of 2013.

The meeting is coming on the heels of dismal unemployment and manufacturing data that highlighted the bloc's worsening financial and social situation. Despite this, most analysts are expecting the eurozone finance ministers to leave the eurozone's record low 0.75 interest rate unchanged.

The press conference following the meeting will be of most importance to investors, who will be waiting to hear bank President Mario Draghi's thoughts on the region's current status.

According to Bloomberg, many are expecting Draghi to resort to unconventional measures in an attempt to fix the broken financial system.

At the moment, many are concerned about small companies in struggling nations like Spain and Italy being denied credit because of the disconnect between the official lending rate and the amount banks are actually charging.

In places like Germany, small businesses can take advantage of low rates, but in places where banks are struggling the benefits of a low rate don't reach the small and medium sized businesses they are aimed at.

Draghi is also likely to address questions about the ECB's role in the controversial Cypriot bailout. The bank's proposal to tax all deposits within The Bank of Cyprus, which was rejected by members of Cyprus' parliament, has raised eyebrows and rattled markets.

Now, capital controls have been introduced in the euro for the first time to prevent investors from withdrawing their money. The entire episode has damaged confidence in the region, and many believe that it has derailed the region's recovery.

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

 

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