ECB: Taper assured but focus was more on needed accommodation - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that they are not surprised to see the quick reversal in EUR/USD from its brief spike above the 1.1000 level given MUFG’s overall take that President Draghi said enough in the press conference to keep QE extension expectations firmly in play.

Key Quotes

“President Draghi did that by confirming that there would details announced in December on staff studies on how to ensure continued smooth implementation of QE, making it very likely that we will get a formal policy announcement then.

While tapering speculation may well persist, Draghi was very clear on emphasising the importance of maintaining “very supportive monetary policy” given the continued downside risks to economic growth. The surge in EUR/USD on Draghi admitting that a QE extension was not discussed predictably faded as he admitted that a discussion on tapering also did not take place. In addition, Draghi confirmed that QE was not going to stop suddenly, essentially confirming that some form of tapering will be implemented – but for now we just don’t know when.

However, it was notable how confident Draghi appeared when discussing the issue of scarcity and the initial feedback from staff committees would appear to have signalled that scarcity is not a problem. Therefore with adjustments to programs, extending QE at the current EUR 80bn pace for a period beyond March before implementing a tapering program appears feasible.”