ECB's QE quite unlikely at the moment - BTMU

By FXstreet.com | August 08, 2014 AAA

FXStreet (Barcelona) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, sees the EUR lower and a QE program in the EU less likely.

Key Quotes

"Draghi encourages euro selling While acknowledging yesterday the increased geopolitical risks related to Russia, ECB President Draghi kept the broad assessments of the economy and inflation unchanged. The key purpose of yesterday it would seem was twofold – firstly to push back on political pressure to do more by calling for labour market reform but secondly to emphasise the fact that the ever-growing divergence in policy between the euro-zone and the US would last for some time."

"That implied that the “fundamentals for a weaker exchange rate are much better than they were two or three months ago”. He also noted some reversal of short-term capital inflows the euro-zone."

"President Draghi did also keep the QE expectation alive by stating an external consultant would be hired to design the ABS QE program. However, there was nothing notably new on this relative to the announcement in June and we doubt there’ll be much reaction to ABS QE given the assumption that the size of any plan is likely to be relatively small."

"QE in the sovereign debt markets would be a totally different story but we do not envisage the ECB embarking on such a program. The comments on the exchange rate certainly reinforce our belief that the ECB sees the exchange rate as a key variable in influencing short-term risks to price stability and in that sense may continue to subtly talk it lower."

comments powered by Disqus
Related Forex Analysis
  1. GBP/USD upside remains corrective – Commerzbank
    Forex News

    GBP/USD upside remains corrective – Commerzbank

  2. USD/CHF shows recovery attempts, as it bottomed at 0.9340
    Forex News

    USD/CHF shows recovery attempts, as it bottomed at 0.9340

  3. EUR/USD Daily Outlook - September 19
    Investing

    EUR/USD Daily Outlook - September 19

  4. SEB:  More EUR/USD buying seen above 1.2943 - eFXnews
    Forex News

    SEB: More EUR/USD buying seen above 1.2943 - eFXnews

  5. USD/CAD at Risk for Larger Downside Correction on Sticky Canada CPI
    Forex News

    USD/CAD at Risk for Larger Downside Correction on Sticky Canada CPI

Trading Center