IMF Suggests ECB Take Larger Role in Crisis Prevention

(eToro Blog) Though the European Central Bank has done its best to avoid being cast as a “white knight” coming to the rescue of the Eurozone’s as it battles a debt crisis, the International Monetary Fund insists that they could play a larger role. In its regular report, the IMF said that the ECB could tame the crisis through monetary measures including additional rate cuts, increasing asset purchases and by simply providing more liquidity. Further they believe that the IM could and should be afforded lender of last resort functionality, much like the U.S. Federal Reserve. Simply put, the IMF believes the ECB could help keep the crisis from escalating by providing additional defenses.

At the latest meeting of E.U. finance ministers, it was it was decided that the ECB should take on a supervisory role for a banking union comprised of the Eurozone’s banks and the IMF says that giving the ECB explicit responsibility to ensure financial stability would be a step in the right direction.

The IMF report lists a whole host of measures that the ECB could take which include a rate reduction from the current 0.75%, quantitative easing with sizable and/or strategic bond purchases, offering more liquidity through the LTRO, and creation of a representative portfolio consisting of long-term sovereign debt purchased in equitable measure as determined by GDP contribution.

The EUR/USD pair is currently higher at 1.2310, just a few pips from the day’s high, and sentiment on OpenBook is predominantly bullish, with 72% buying against 28% selling. One of those who went long is OpenBook guru NMarijus from Lithuania, who closed a pair of TP-hitting longs with an average profit of more than 4%, and with those two trades has now cleared all of his open trades. Over the past six months, the guru has had a 96.9% allocation in the EUR/USD pair which has returned 4.9%; 101 trades were executed in the period with 95% of them resulting in a profit. The guru’s stats are once again a page of greens; last week he recorded a 6% profit, for the last month it was 28.8%, for the last quarter 93.2%, for the last 6-months it was 21.1% and for 12-months the recorded profit was 263.5%. The guru has 758 copiers and 17,886 followers and many have expressed their pleasure that he is back in form.

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