See money flowing from euro into US dollars: Hans Goetti

Hans Goetti, Head of Investment - Asia, Banque Internationale says with the European Central Bank (ECB) cutting rates there will be outflow of money from euro into US dollars. He says the ECB has delivered more than the market expected, which could eventually lead to quantitative easing and expansion of ECB balance sheet. According to him the technical support fot the euro is around 1.28 levels in the near-term but it could also see levels of 1.20 in the medium-term in case the ECB follows through with expansion of its balance sheet and the Fed at the same time keeps tapering by not expanding the  balance sheet. TechOn the US Jobs data front, he expects the number to be anywhere between 220,000-250,000In a bid to tackle the slowdown in Eurozone, the European Central Bank (ECB) on Thursday cut interest rates to a fresh record low. The central bank has cut benchmark interest rate to 0.05 percent from 0.15 percent and marginal lending rate to 0.3 percent, while deposit rates have been slashed to -0.2 percent from -0.1 percent.Below is the transcript of Hans Goetti's interview with Nigel D'Souza and Reema Tendulkar on CNBC-TV18.Nigel: How do you read the situation? Yesterday the European markets ran along, there was no reaction whatsoever on the US markets while the Asian markets are quite subdued this morning, what is your take on it? Where is the money going to flow?A: First of all, it is going to flow out of the euro. We have seen a pretty strong reaction on the downside in the euro and that is indicative of a lot of money flowing into US dollars. I think that is the global trend. The European Central Bank (ECB) delivered what the markets are hoping for. In fact, they have probably delivered a little bit more because the interest rate cuts were not widely expected.So what you are going to see is a move towards quantitative easing (QE) eventually and an expansion of the ECB balance sheet. Remember, balance sheet of the ECB shrank from 2.7 trillion in 2012 to 2 trillion and they have clearly indicated, they are going to expand it again which means weaker currency.Reema: What is the size of the current bond buying programme and any signals by Mario Draghi about what the future ECB policy by way of stimulus could be?A: The plan to buy asset backed securities – essentially, the idea behind it is that bank lending will pick up and they think that in the asset backed space that is the most likely to happen as far as they are targeting this and it is a sizeable injection of liquidity obviously. So that is the ideav to jumpstart an economy that has clearly started to slowdown in the aftermath of sanctions against Russia. Remember, sanctions work both ways and jumpstarting lending would be a way to revive the economy.Nigel: This evening in fact we have that crucial jobs report that is going to be out in the US. What is your expectation of it?A: I think the consensus is calling for about 220,000-250,000, which would be a good number. The labour market in the US has been improving for quite some time now. We have had more than 200,000 every month this year. So that is not the problem. The Fed, however, is looking at several components of the labour market and even strong number coming out of it does not necessarily mean that the Fed is going to raise rates anytime soon and they actually intend to do.Reema: You spoke about the direct impact of the ECB policy will be money out of the euro. The euro has already slipped below 1.30, has that priced in or do you expect further weakness in the euro? What would your key target level be?A: The target level on a technical basis in the near-term is 1.28, it is almost there but if that level does not hold, in the medium-term we could see 1.20 easily.Reema: 1.20 on the euro/dollar?A: US dollar/euro 1.20 in the medium-term if the ECB follows through on the expansion of its balance sheet and the Fed at the same time keeps tapering by not expanding the balance sheet.Reema: So you expect follow through of further stimulus from the ECB?A: Yes, they telegraphed that clearly. They are going to expand the balance sheet and usually when Central Bank expands the balance sheet in relation to another Central Bank, the one that expands the balance sheet more, gets the weaker currency.