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4 Dec 2014
ECB success to depend upon Draghi’s determination – DB
FXStreet (Barcelona) - The Deutsche Bank Research Team believe that the success of today’s ECB meeting will probably depend on the degree to which Draghi will indicate the need for more action, alongside the unanimity of the council.
Key Quotes
“Today we'll learn more about whether Mr Draghi becomes Super Mario in the near future as the widely anticipated ECB meeting is now only a few hours away. DB's Mark Wall is not expecting anything concrete to be delivered with no new commitments to asset purchasing or tweaks to the tLTRO terms.”
“He thinks that the council remains in wait and see mode until the impact of the current ABS/covered purchase programmes and take up from the Dec 11th tLTRO2 are known. Mark's team continue to believe that a broad based asset purchase scheme (including Government bonds) will be announced by the end of Q1 but unlikely before.”
“Assuming no new policy moves, the success of today's meeting will probably depend on the degree to which Draghi indicates the need for more action soon and the degree to which that feeling is unanimous within the council. Over the past weekend Weidmann's comment about falling oil prices representing a form of stimulus highlights that this consensus is still proving difficult to build. It might need a couple more months of low growth and inflation, revised staff forecasts and a stubbornly slow balance sheet accumulation to cement action.”
“In terms of trading, given that I'm confident broad based QE is coming I don't think setting up for disappointment today is a particularly fruitful policy. It might work for a short while but given the illiquidty, especially in assets like credit, one would have to be confident of a big move wider in the short-term or a view that the ECB will never quite be able to pull the trigger. We think we'll get a few small hints today and the trigger in Q1. As such we continue to be bullish European credit.”
Key Quotes
“Today we'll learn more about whether Mr Draghi becomes Super Mario in the near future as the widely anticipated ECB meeting is now only a few hours away. DB's Mark Wall is not expecting anything concrete to be delivered with no new commitments to asset purchasing or tweaks to the tLTRO terms.”
“He thinks that the council remains in wait and see mode until the impact of the current ABS/covered purchase programmes and take up from the Dec 11th tLTRO2 are known. Mark's team continue to believe that a broad based asset purchase scheme (including Government bonds) will be announced by the end of Q1 but unlikely before.”
“Assuming no new policy moves, the success of today's meeting will probably depend on the degree to which Draghi indicates the need for more action soon and the degree to which that feeling is unanimous within the council. Over the past weekend Weidmann's comment about falling oil prices representing a form of stimulus highlights that this consensus is still proving difficult to build. It might need a couple more months of low growth and inflation, revised staff forecasts and a stubbornly slow balance sheet accumulation to cement action.”
“In terms of trading, given that I'm confident broad based QE is coming I don't think setting up for disappointment today is a particularly fruitful policy. It might work for a short while but given the illiquidty, especially in assets like credit, one would have to be confident of a big move wider in the short-term or a view that the ECB will never quite be able to pull the trigger. We think we'll get a few small hints today and the trigger in Q1. As such we continue to be bullish European credit.”