This is no time to taper, simply because of the challenging inflation dynamics in the Eurozone. A premature taper, which a decision to this effect at this meeting would certainly only complicate the ECB's task of getting the EZ out of low inflation and fundamentally banishing deflation risk.
Some have been discussing scenarios that aim to split the difference for the ECB for example purchases to a monthly pace of EUR 40-50 bn, but then extending the program for longer, say through Q1 2018. We think such proposals fail to take account of how sceptical markets have become where the ECB is concerned. After all the Dec '15 meeting and the misfire in March of this year have taught markets to be extremely sceptical as to the ECB's willingness and ability to ease.
Markets are putting more weight on the tapering signal rather than any kind of program extension. Upside is unlikely to extend much beyond 1.08. Markets may also be anticipating that the calm response to the weekends political events will encourage ECB to emphasize the limits to its QE intentions.
All the best, please remember to give this a thumbs up and comment your views.
Comment
⋅
as I am sure you have seen 1.03440 has not been taken out which was crucial for bears; I have changed my outlook from neutral to buy - hope you all managed to make a few on this.
Good analysis. I agree with the view that the ECB is unable to make any hawkish moves or comments that would be supportive of the euro. There are enormous problems in the EU and the last thing they need is a euro that appreciates from these levels. Of course the markets aren't logical but the smarter move seems be shorting the euro on the rises.
TheBanker
⋅
@explorionary, couldn't agree with you more! :)
sachdk
⋅
history can be repeated but history can not be repeated exactly the way it has been.....