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2 Jun 2015
ECB Meeting: Draghi to remain dovish – KBC
FXStreet (Barcelona) - Previewing the ECB Meeting scheduled for tomorrow, the KBC Bank Research Team expects Draghi to keep the line on duration and size of its asset purchase programme.
Key Quotes
“In general, the ECB should be satisfied by most recent developments in relation to the roll-out of its purchases programme and the modestly improving health of the Euro area economy. Admittedly, there was some unrest when bond yields suddenly rose at the end of April and first half of May. The German 10-year yield increased without a specific reason from 5 to 77 basis points. As US yields rose less and the rate differential increased, the euro strengthened from 1.05 to almost 1.15.”
“While some volatility cannot be avoided in markets, it seems to have made ECB governors nervous. It is maybe no coincidence that ECB Coeuré said that the ECB would buy somewhat more bonds in May/June and less during the summer months due to presumably limited liquidity.”
“Calm on the markets returned, maybe partly because of Coeuré’s comments. Importantly, the euro weakened again (to about 1.09 against the dollar) and yields eased about 25 basis points. Equities more or less stabilized, keeping overall financial conditions in the Eurozone very favourable.”
“We expect Draghi will downplay the Coeuré comments and show no signs of panic about the recent market volatility, which he will qualify as part of natural market behaviour.”
“The main message of Mr. Draghi probably will be that the ECB remains committed to the seize and duration of the asset purchase programme, that he will argue as successful till now.”
Key Quotes
“In general, the ECB should be satisfied by most recent developments in relation to the roll-out of its purchases programme and the modestly improving health of the Euro area economy. Admittedly, there was some unrest when bond yields suddenly rose at the end of April and first half of May. The German 10-year yield increased without a specific reason from 5 to 77 basis points. As US yields rose less and the rate differential increased, the euro strengthened from 1.05 to almost 1.15.”
“While some volatility cannot be avoided in markets, it seems to have made ECB governors nervous. It is maybe no coincidence that ECB Coeuré said that the ECB would buy somewhat more bonds in May/June and less during the summer months due to presumably limited liquidity.”
“Calm on the markets returned, maybe partly because of Coeuré’s comments. Importantly, the euro weakened again (to about 1.09 against the dollar) and yields eased about 25 basis points. Equities more or less stabilized, keeping overall financial conditions in the Eurozone very favourable.”
“We expect Draghi will downplay the Coeuré comments and show no signs of panic about the recent market volatility, which he will qualify as part of natural market behaviour.”
“The main message of Mr. Draghi probably will be that the ECB remains committed to the seize and duration of the asset purchase programme, that he will argue as successful till now.”