7 Jun 2013
Flash: ECB rate hold wasn't a surprise - Deutsche Bank
FXstreet.com (Barcelona) - Jim Reid of Deutsche Bank feels that regarding the ECB meeting, the decision to keep policy rates unchanged this month probably didn’t surprise many.
However, he adds that Draghi’s post-meeting comments were seen as sufficiently ‘un-dovish’ to cause a late selloff in European equities (Stoxx600 - 1.2%) and a rally in EUR/USD (+1.2%). He writes, “As DB’s Gilles Moec writes, it was always going to be difficult for Draghi to live up to the expectations he had (maybe involuntarily) created at last month’s meeting.” Indeed, he feels that on the topic of reviving the market for ABS and SME funding, Draghi described any progress as likely to be a “medium to long term proposition”. Reid also notes that he also mentioned that other stimulus measures, such as a cut in the deposit rate are conditional on a material worsening of the dataflow, and as such are “on the shelf” for now. He finishes by writing, “On balance, DB’s economists see increased risk to their baseline call for a refi cut in July or August. If the dataflow improves slightly more quickly than their general view, the ECB will refrain from changing its policy stance in their view.”
However, he adds that Draghi’s post-meeting comments were seen as sufficiently ‘un-dovish’ to cause a late selloff in European equities (Stoxx600 - 1.2%) and a rally in EUR/USD (+1.2%). He writes, “As DB’s Gilles Moec writes, it was always going to be difficult for Draghi to live up to the expectations he had (maybe involuntarily) created at last month’s meeting.” Indeed, he feels that on the topic of reviving the market for ABS and SME funding, Draghi described any progress as likely to be a “medium to long term proposition”. Reid also notes that he also mentioned that other stimulus measures, such as a cut in the deposit rate are conditional on a material worsening of the dataflow, and as such are “on the shelf” for now. He finishes by writing, “On balance, DB’s economists see increased risk to their baseline call for a refi cut in July or August. If the dataflow improves slightly more quickly than their general view, the ECB will refrain from changing its policy stance in their view.”