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Take up from ECB’s first TLTRO also in focus - BTMU

FXStreet (Bali) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJThe, notes that other than the FOMC, the take up from ECB’s first TLTRO will also be in focus.

Key Quotes

"This week Another event risk in the week ahead will be the announcement of the results from the ECB’s first TLRO on Thursday. It will provide a tentative opportunityto assess the potential success of the new easing measures announced by the ECB in recent months.The ECB has high hopes that the TLROs will: i) significantlyexpand the size of their balance sheet,with take up potentially reaching up to EUR1.0 trillion, and ii) encourage bank lending to the private sector."

"According to the latest Bloomberg poll of economists released yesterday,their consensus median expectation for total TLRO take up is more modest at just under EUR600 billion, with take up from the first TLRO specifically expected at around EUR150 billion. Lower than expected take up could be viewed as less negative for the euro by implying a lower than expected expansion ofthe ECB’s balance sheet."

"Alternatively, if take up from the LTROs disappoints expectations it may also increase pressure on the ECB to increase asset purchases by a larger amount acting as a dampener on the euro. ECB President Draghi was very clear in signalling that the ECB intends to raise the size of their balance sheet back towards “2012 dimensions”."

"We continue to expect further euro weakness and would view any relief euro rally on a lower TLRO take up this week as likely only temporary. The consensus median expectation for total ECB private asset purchases was EUR410 billion which is made up ofexpected ABS purchases totalling EUR250 billion and covered bond purchases totalling EUR160 billion."

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