12 Feb 2014
Flash: ECB serious about negative rates - Societe Generale
FXStreet (Guatemala) - Sebastien Galy, Senior FX Strategist at Societe Generale explained that the “ECB IS CONSIDERING NEGATIVE DEPOSIT RATE "VERY SERIOUSLY".
Key Quotes:
"ECB IS CONSIDERING NEGATIVE DEPOSIT RATE "VERY SERIOUSLY" This came out at around 6:30EDT. We had known it was one of the tools the ECB had worked on and very seriously prepared for as early as last year."
"Its key function is to ease conditions, but far more fundamentally to counter the appreciation of the EUR. They know what happened to Danish reserves in a similar case and it worked to reverse the gains."
"The fact that it starts to be pushed as an option indicates that the political equilibrium has shifted in the Eurozone following the Swiss vote. It did matter."
"Far too much of the adjustment in prices is happening via internal prices in the Eurozone, leading to political tensions. This is the much delayed valve as monetary hawks in the Eurozone are starting to realize that cyclical models of currencies which show the EUR as fairly valued are misleading."
"The protected sectors of the Eurozone are very expensive vs the rest of the World the US included. I was dubious that negative rates would be so effective to weaken significantly the EUR, i stand humbly corrected by the current move which clearly shows a large sensitivity of FX. Equities and local FI will benefit from this move acting as a countervailing force."
Key Quotes:
"ECB IS CONSIDERING NEGATIVE DEPOSIT RATE "VERY SERIOUSLY" This came out at around 6:30EDT. We had known it was one of the tools the ECB had worked on and very seriously prepared for as early as last year."
"Its key function is to ease conditions, but far more fundamentally to counter the appreciation of the EUR. They know what happened to Danish reserves in a similar case and it worked to reverse the gains."
"The fact that it starts to be pushed as an option indicates that the political equilibrium has shifted in the Eurozone following the Swiss vote. It did matter."
"Far too much of the adjustment in prices is happening via internal prices in the Eurozone, leading to political tensions. This is the much delayed valve as monetary hawks in the Eurozone are starting to realize that cyclical models of currencies which show the EUR as fairly valued are misleading."
"The protected sectors of the Eurozone are very expensive vs the rest of the World the US included. I was dubious that negative rates would be so effective to weaken significantly the EUR, i stand humbly corrected by the current move which clearly shows a large sensitivity of FX. Equities and local FI will benefit from this move acting as a countervailing force."