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Difficult meeting today for Mr Draghi - Deutsche Bank

FXStreet (Łódź) - Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, suggests that market attention will be focused today on whether Mario Draghi hints at much more future action, although no concrete moves are expected.

Key quotes


"There really isn't much to go on for today with no real concrete leaks in the press. However the past few weeks have seen a series of news articles coming out hinting at what might be on the minds on the ECB. First we had a Reuters report a couple of weeks back suggesting that the ECB is considering purchasing corporate bonds. This helped with the snapback in markets reinforcing the claim that the stakes are high and that markets are still heavily controlled by central bank actions."

"Then on Tuesday Reuters again influenced the market by highlighting internal problems the ECB is grappling with when it reported on dissent within the council as to the next steps for European monetary policy. As a reminder it suggested that, 'At least seven and possibly as many as 10 of the 24 council members are against U.S.-style quantitative easing.' The article pointed to deep disharmony and there are bound to be questions about it today in the Q&A."

"With so much in play, our European economists wrote in last week’s Focus Europe that, 'Merely repeating the line that the Council remains unanimous in its commitment to other unconventional policies if necessary — that is, no escalation of rhetoric — would disappoint the market.'”

"In terms of what might actually be mentioned today, our economists expect that, 'at best ... Draghi could only endorse corporate bond QE implicitly. He could re-introduce the phrase that the Council is ready to adjust the 'size and composition' of asset purchases.'”

"In terms of public QE, they expect that, 'Rather than acting early to maximize the impact of QE by surprising the market, we see the ECB delaying action to secure a broad enough consensus inside and outside the Council. As time passes, growth and inflation expectations should fall and market stress may rise ... we expect public QE, but probably not until later in Q1.”

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