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ECB: We do not expect much fireworks at this week’s meeting - Rabobank

On Thursday, the Governing Council of the European Central Bank will meet. According to analysts from Rabobank, believe the ECB will maintain the risk assessment of “broadly balanced”. They see that weakness in economic data has persisted, but there are signs that a rebound is still possible. 

Key Quotes: 

“Economic data hasn’t quite recovered yet from its Q3 weakness. However, we believe that it is too early for the ECB to downgrade their assessment of risks to the economic outlook.”

“The main announcements will therefore pertain to the asset purchase programme. We believe the ECB will confirm the end of net purchases...”

“Any further modalities with respect to the reinvestment programme will probably emphasise the flexibility of the reinvestment purchases, so that the ECB can ensure smooth execution of these reinvestments in the coming years. Additionally, ‘market neutrality’ will remain the other cornerstone of the policy.”

“Mr. Draghi is facing some challenges in the form of more volatile market conditions and an uncertain economic outlook. But the economic cloud also has some silver linings that the ECB president can use to defend the Governing Council’s policy choices. That should save the Council from having to resort to offsetting policy measures that could easily backfire if things do take a turn for the better in the coming months.”

“If Mr. Draghi indeed sticks to this script and stays on the safe side –that is, only touching on the already-expected measures– we would expect a very limited market reaction. Potentially, Mr. Draghi could re-anchor expectations with respect to the first rate hike a bit – after these have shifted back and forth between September 2019 and March 2020 in recent weeks. However, we don’t expect him to stray from the “through the summer of 2019” guidance, and as such he would have to convey any message through his view on the macroeconomic outlook.”

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