ECB to manage market expectations ahead of the meet – Westpac

There is still a full week before the ECB’s “quiet period” in advance of the 20th July board meeting which gives opportunities to address expectations should markets move beyond ECB comfort levels or are seen to have misinterpreted the shift signalled by Draghi in Sintra, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“ECB’s Peter Praet has already made it clear that “policy will be persistent”, indicating that (as Draghi stated) accommodation will remain for a considerable time and shift in line with financial conditions.”

“Meanwhile data, notably surveys, have persistently pushed higher and exceeded consensus forecasts. Despite some flickers of momentum moderation, the IFO and PMI data still signal very solid growth. This will persistently eat into Eurozone’s 18% underemployment, even if a lot of labour slack remains.”

“The lack of EUR pullbacks suggests that it will continue to establish a higher range 1.10-1.16 for EUR/USD.”