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Euro trashed on ECB hike delays

Thursday, Jun 14 2018
Euro trashed on ECB hike delays

The ECB announced no changes to rates (entirely expected) but that the APP beyond September would be tapered from purchases of €30bn in September to €15bn per month in the December quarter before ending in December. That part of it was expected. While inflation was upgraded from 1.4% for this year and next year by 0.3% to 1.7%, there was no change to the 2020 forecast that remained unchanged at 1.7%. No “2” handle and thus not yet getting to target. Couple that with the prospect now that rates will be on hold at least through the summer of 2019, rather than an expectation of a move a year from now and the seeds were sown for a pullback in the Euro. After recent almost-hawkish remarks from ECB Chief Economist Praet, the market was hoping for more and disappointed.

Speaking at his press conference, Draghi described why the ECB took the decisions it did today and was asked whether he might be able to raise rates once before he leaves (Oct 2019). His watchword was uncertainty, something he repeated. This did not sound like a man or Governing Council that was especially confident in why they decided to end QE. You could be forgiven for thinking that the ECB has set the market up nicely to expect more and delivered a result where the market has not over-reacted to anything that could be interpreted as hawkish.

More in this category: « UK CPI unchanged in May U.S. Consumer Sentiment Rises While Tariffs Weigh on Outlook »

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