EUR/USD managed to gain some ground after Draghi removed some urgency. What does this mean for the euro? Here are three opinions:
Here is their view, courtesy of eFXnews:
EUR: Here Is The Next Step From The ECB After the ‘Hawkish Twist’ – Danske
The ECB kept all policy measures unchanged at today’s meeting, and President Draghi had a hawkish tone during the Q&A session as he said the Governing Council discussed whether to remove the ‘lower levels’ from the forward guidance on policy rates, notes Danske Bank Markets.
“In our view, a next step from the ECB when moving in a less dovish monetary policy direction is to remove the ‘lower levels’ from the forward guidance. However, according to Draghi this is a very small step and in our view it also does not mean the ECB will hike policy rates in the near future,” Danske argues.
“We expect the ECB to continue to communicate that policy rates will remain at present levels for an extended period of time, and well past the horizon of the QE purchases. Hence, it should not start to communicate that policy rates could be hiked before the QE purchases have stopped running,” Danske projects.
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EUR: ‘ECB Edging Towards An Exit’; Expect First Step In June – ABN AMRO
Today’s ECB press conference suggests that the ECB will embark on a gradual path towards the exit in the coming months, argues ABN AMRO.
“We think the first step will be a change in the ECB’s forward guidance at the June Governing Council meeting. The guidance will likely become more neutral, dropping the explicit possibility of cutting rates or stepping up QE. We then expect the ECB to set out its plan for tapering in September. It could signal a tapering of asset purchases in 2018, contingent on seeing progress in inflation that would make it more confident in meeting its medium term goal,” ABN AMRO adds.
Moreover, ABN AMRO expects tapering from April 2018 onwards at a pace of EUR 10bn per month, and that would see the program coming to a halt in September of next year.
Finally, ABN AMRO expects the ECB first deposit rate hike in March 2019.
EUR: Marginally Strongly A Dovish Outcome With A Hawkish Twist From The ECB – SEB
Having already kept its policy stance unchanged in January, the ECB Governing Council also maintained the steady-hand approach in today’s meeting, notes SEB.
The press statement was a mere copy/paste from the previous one. The introductory statement presented by Draghi, on the other hand, showed a significant change of the wording in comparison to January, suggesting that a further reduction of ECB policy rates is no longer deemed necessary.
“Overall, we would describe the outcome of today’s meeting as “dovish with a hawkish twist” – an assessment shared by rates and FX markets which reacted with higher Bund yields, a steeper yield curve and a marginally stronger euro,” SEB argues.
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