We expect the ECB to announce a six-month extension of its quantitative easing programme beyond March 2017 at the present pace of EUR 80 billion per month (interest rate announcement: 12:45 GMT; press conference: 13:30 GMT). The decision to keep buying assets at an unchanged pace would largely be intended to preserve the current “very substantial degree” of monetary accommodation, at a time when core inflation suggests limited progress towards a “sustained adjustment in the path of inflation consistent with the Governing Council’s inflation aim”. Following the recent back-up in long-term yields, scarcity has become less of an issue for the ECB. However, we still predict an increase of the ISIN limit up to 50% (from 33%) and a switch to a more flexible definition of the deposit-rate floor, applying it to a portfolio of bonds rather than to each individual security. The combination of these two measures would increase the ECB’s flexibility and make it easier for the central bank to continue the program at the current pace until around the end of 2017 even if long-term German yields were to fall back towards zero. Higher yields in the core countries, together with some spread widening in the periphery, have significantly reduced the likelihood that the ECB will announce any politically controversial recalibration of the capital keys at this stage.
ECB President Mario Draghi is expected to argue that premature tapering - or slowly ending - bond-buying could abort a still timid recovery, unravelling the impact of the buys.
ECB's fresh economic forecasts will be broadly unchanged from three months ago and the projection for core inflation is likely to be cut.
The general economic outlook is not so bad and the ECB may start to think about removing stimulus soon. Inflation, which has been dangerously low, is now at a more than 2 year high and rising, with higher oil prices and predictions for more U.S. budget spending bolstering expectations. Euro zone economic growth is shrugging off Britain's decision to leave the European Union, and Germany, the bloc's growth engine, seems to be picking up speed again.
We stay EUR/USD long, but the scale of the move depends on the ECB statement. We have raised the target to 1.0940. Technical analysis supports our bullish view. Long tail on Monday’s large candlestick signals a massive rejection of the downside.
GrowthAces.com - Daily Forex Trading Strategies
ECB President Mario Draghi is expected to argue that premature tapering - or slowly ending - bond-buying could abort a still timid recovery, unravelling the impact of the buys.
ECB's fresh economic forecasts will be broadly unchanged from three months ago and the projection for core inflation is likely to be cut.
The general economic outlook is not so bad and the ECB may start to think about removing stimulus soon. Inflation, which has been dangerously low, is now at a more than 2 year high and rising, with higher oil prices and predictions for more U.S. budget spending bolstering expectations. Euro zone economic growth is shrugging off Britain's decision to leave the European Union, and Germany, the bloc's growth engine, seems to be picking up speed again.
We stay EUR/USD long, but the scale of the move depends on the ECB statement. We have raised the target to 1.0940. Technical analysis supports our bullish view. Long tail on Monday’s large candlestick signals a massive rejection of the downside.
GrowthAces.com - Daily Forex Trading Strategies
