ECB policy announcement a material negative for the euro
We were expecting an ECB tapering
announcement today but not a commitment to keep rates unchanged until at least "the summer of 2019".
While the market has not been pricing a rate hike until later next year, we view the introduction of
calendar-based guidance as a material negative development for the euro. First, this is the first time in
the history of ECB where such unconditional calendar-based guidance has been introduced. Given that the
ECB has refused to "pre-commit" in the past and always ascribed to state-contingent guidance, the
willingness to enter into fixed date-based guidance is a material evolution to the policy framework
signaling a greater dovishness of the council. Second, even if the market has not been priced for a rate
hike until after the summer of 2019, calendar-based guidance shifts the distribution of risks. While the
ECB can always extend the calendar guidance further out in the event of negative news, the ability for
the market to reprice more hawkishly in the event of better news is now severely constrained. This is
further reinforced by the conditional based nature of the end to the PSPP program that has been
announced. From a market perspective, the main implication of the "refreshed" ECB guidance should be
to depress European rates volatility as well as encourage the use of the euro as a funding currency. We
argued in favor of a 1.15-1.20 EURUSD summer range earlier this morning. Our conviction in the lower end
of that range holding has now been materially reduced.
Alle Rechte vorbehalten. Nutzung ausschließlich für den privaten Eigenbedarf.
Eine Weiterverwendung und Reproduktion über den persönlichen Gebrauch hinaus ist nicht gestattet.
Kursdaten: Powered by Interactive Data Managed Solutions (IDMS). IDMS und die Datenlieferanten übernehmen keine Gewähr für die Richtigkeit, Vollständigkeit und Aktualität der Inhalte des Informationssystems. Die Kursdaten werden je nach Vereinbarung mit den Börsen/Handelsplätzen in Realtime, 15 Min. verzögert oder End-of-Day dargestellt. Weitere Hinweise entnehmen Sie bitte unseren AGB (§4 Abs.7).