ECB to keep the statement unchanged from Oct - TDS

Analysts at TDS are looking for the ECB to keep the statement unchanged from Oct. Since the new, lower pace of QE hasn’t even begun yet, the ECB will want to at least see how that goes before considering language changes, they further add.

Key Quotes

“The focus for the intro statement will likely be on the new forecasts. We look for a tempered upgrade to GDP growth, for a below-target 2020 HICP forecast, and for no more reference to an uptick in core CPI.”

“In the press conference, we look for Draghi to steer the conversation toward the continuous improvement in the growth outlook, and the ECB’s confidence that underlying inflation will rise as excess slack continues to diminish. We look for questions on the composition of QE and recent moves in EONIA.”

“FX Strategy: With our base case coming in at the dovish end of the market, we see some moderate downside risks to EURUSD overall. Trading may remain choppy through the event, but we think spot could find a home around 1.1670 unless a clearer directional message emerges.”

“Rates Strategy: Rates moves to remain muted if the ECB maintains its pledge of a sustained market presence. FX markets may be the main adjustment mechanism, but rates may react to signals around the “open-endedness” of APP as well as the “composition” of APP from January.”