Nordea on the ECB and euro

Nordea Research discusses its reaction to today’s ECB policy outcome in which the central bank announced an easing package consisting of strengthened forward guidance (no rate hike 2019) and new liquidity operations (TLTRO-III).

“The details of the ECB’s easing package thus do not appear to be as dovish as Draghi tried to make them in the press conference. Draghi’s comments imply the ECB retains an easing bias at this point, but the threshold for larger-scale measures, such as restarting asset purchases, remains high. This despite the fact that the ECB made sizable downward revisions to its growth and inflation outlook, and continues to see the growth risks tilted to the downside,” Nordea notes.

“The ECB retains an easing bias and stands ready to extend the forward guidance further, if needed. We postpone our first and now only rate hike call to June 2020, with increased risk of no hikes in our forecast horizon (until the end of 2020)….

The meeting didn’t provide much food for strategic (2-3 months) EUR bulls either. The EUR was not stronger against the USD 90 trading days after TLTRO-II, TLTRO-I, LTRO-II and LTRO-I. Hence, it’s hard to imagine a really strong EUR performance over the next quarter,” Nordea