6 Feb 2014
Flash: ECB has every reason to ease further - Societe Generale
FXStreet (Córdoba) - Kit Juckes, Global Head of Currency Strategy at Societe Generale feels that the ECB has every reason to ease further.
Key Quotes
"When the ECB cut the refi rate by 25bp in November, it briefly pushed 3M rates down to 22bp, sending EUR/USD from 1.35 to 1.33. Market rates didn't stay down and nor did the currency. Since then, the ECB has repeatedly signalled that further action is possible."
"Against a backdrop of very low inflation and a lack of any credit growth at all, there is every reason to ease further. Sadly, absent deflation and in the face of improving economic data, procrastination and token easing are more likely than real action."
"We look for no move, while there is a significant minority in the market expecting a further 15bp shift down in the Refi to 0.1%. Most economists expect more half-promises of further action the press conference and more easing in the months ahead. Our line-drawing team warn of major support here in the Bund yield and the risk is that the ECB doesn't do anything to make the market test it."
Key Quotes
"When the ECB cut the refi rate by 25bp in November, it briefly pushed 3M rates down to 22bp, sending EUR/USD from 1.35 to 1.33. Market rates didn't stay down and nor did the currency. Since then, the ECB has repeatedly signalled that further action is possible."
"Against a backdrop of very low inflation and a lack of any credit growth at all, there is every reason to ease further. Sadly, absent deflation and in the face of improving economic data, procrastination and token easing are more likely than real action."
"We look for no move, while there is a significant minority in the market expecting a further 15bp shift down in the Refi to 0.1%. Most economists expect more half-promises of further action the press conference and more easing in the months ahead. Our line-drawing team warn of major support here in the Bund yield and the risk is that the ECB doesn't do anything to make the market test it."