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European stocks ending the session lower

UK FTSE down -0.6%

The European major stock provisional closes are ending the session with declines.
  • German Dax, -0.4%
  • France’s CAC, -0.5%
  • UK FTSE, -0.6%
  • Spain’s Ibex -1.2%
  • Italy’s FTSE MIB, –1.03%
In the benchmark 10 year note sector, yields are ending the mostly higher after earlier dips. The German 10 year yield reached a low of 0.049% but is ending the day at 0.071%

UK FTSE down -0.6%

ECB’s easing package less dovish than Draghi suggested but no food for EUR bulls – Nordea

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

Reuters polling shows the US dis expected to fall 4% (and EUR/USD up 5%)

Latest Reuters poll of over 70 currency strategists taken Feb 28-March 6
  • USD expected to weaken
  • EUR/USD forecast at $1.19 in a year
Strategists said a positive outcome to U.S.-China trade negotiations was already priced in
  • not likely to give the USD a lift
Reuters with a comment from MUFG
  • “As we pointed out at the start of this year, we see the relative cyclical support for the dollar being less favourable this year than last and that suggests to us some dollar depreciation ahead. The end of balance sheet shrinkage will reinforce a much less active Fed on raising the fed funds rate
  • In addition, there is already evidence of foreign investors being more reluctant to invest in U.S. portfolio securities and we view this reduced appetite as partly a consequence of the level of the U.S. dollar and partly on concerns over the deteriorating budget deficit outlook.”
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