Sound bites: ECB delivers half the goods; more to come - QE will get its moment

The ECB has not learnt from its lessons. The ECB should only be rewarded 5 marks out of 10 for effort. The ECB has only delivered half the goods on easing. They have cut rates by a marginal degree and increased market liquidity, but there is a lot more they could and should have done to boost recovery prospects and to beat deflation. They should have deployed the big gun of real quantitative easing for a start. And they should have done a lot more to ease capital adequacy requirements weighing down on Eurozone banks to help boost borrowing. Domestic credit contraction has been one of the main factors obstructing recovery and lending needs to be freed up. The ECB simply needs to look at what the US Federal Reserve and UK Bank of England have achieved through effective QE programmes – much faster growth and much stronger job creation. With Eurozone rates at rock bottom and deflation risks rattling the front-gate, the ECB has no other alternative now. It is all about end-game. The ECB must embrace full-blown quantitative easing - printing money and buying assets - to put the Eurozone recovery back on track. Without it, the Eurozone recovery is at risk of crashing back down to earth and deflation risks will continue to fester. Japan had been stuck in the deflation doldrums for over a decade until it was prepared to bite the bullet with much more effective monetary pump-priming measures. Abenomics has finally turned the tide in Japan – faster growth and higher inflation have re-engaged. It is up to the ECB to learn instructive lessons from its G7 partners. The ECB should be bold with full-blown QE to take the Eurozone into a new era of recovery. The ECB must avoid being meek with fitful monetary measures or else the Eurozone will founder on the rocks of recession and deflation risks for another decade. Give it another three months and the ECB will be forced to adopt QE. Euro currency bulls are at serious risk now. EURUSD is set for a major break lower and should be down below USD1.30 within a month. Longer term, the euro looks set to trade down towards a much lower trading range of USD1.20-1.25.