ECB: Draghi provides few surprises – MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the ECB President Draghi also spoke yesterday and there were few surprises although the euro did soften on Draghi’s reference to further easing being in the pipeline.

Key Quotes

“This of course was a reference to the new TLTROs already announced rather than any new additional policy easing. However, the markets perhaps also picked up on his less than enthusiastic description of current inflation dynamics, which he stated were “rather subdued”. Given the uncertainties that lie ahead even assuming the UK does not vote for Brexit, the description of inflation dynamics suggests to us certainly scope for further easing at some point going forward.

That will continue to keep EUR/USD in check even with the US dollar weaker on a trade-weighted basis. The German constitution court support of OMT diminishes the prospect of any rejection of QE, which at the margin will make it easier for the ECB to sanction an extension of QE if required.”