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5 Mar 2014
Flash: ECB would remain in the sidelines - BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, expects the ECB to keep the monetary policy unchanged in tomorrow's meeting.
Key Quotes
"We have Services PMIs from the euro-zone today but some of the advance readings have already been released and hence will trigger little market reaction. The key event now is tomorrow’s ECB meeting and the staff projections will probably play a key role in the policy decision taken."
"An inflation forecast of 1.6-1.7% for 2016 would probably offer the ECB the justification to do nothing while a level of 1.5% would probably be deemed to far below the “below but close to 2.0%” official inflation goal. Given that there is likely a portion of the ECB Council opposed to action, we maintain that the likeliest outcome is for no policy action."
"Halting the draining of the SMP may prove too political for that step to be taken now and scrapping the 1% reserve requirement makes more sense. But the EONIA was much more stable in February arguing against liquidity action being urgently needed at this stage."
"We would expect the euro to pop higher if we are correct and the ECB does nothing tomorrow. An eventual test of the 1.4000 level is feasible depending on the tone of President Draghi in the press conference."
Key Quotes
"We have Services PMIs from the euro-zone today but some of the advance readings have already been released and hence will trigger little market reaction. The key event now is tomorrow’s ECB meeting and the staff projections will probably play a key role in the policy decision taken."
"An inflation forecast of 1.6-1.7% for 2016 would probably offer the ECB the justification to do nothing while a level of 1.5% would probably be deemed to far below the “below but close to 2.0%” official inflation goal. Given that there is likely a portion of the ECB Council opposed to action, we maintain that the likeliest outcome is for no policy action."
"Halting the draining of the SMP may prove too political for that step to be taken now and scrapping the 1% reserve requirement makes more sense. But the EONIA was much more stable in February arguing against liquidity action being urgently needed at this stage."
"We would expect the euro to pop higher if we are correct and the ECB does nothing tomorrow. An eventual test of the 1.4000 level is feasible depending on the tone of President Draghi in the press conference."