The research team at Rabobank notes that the ECB left both interest rates and the asset purchases programme unchanged while the Governing Council upgraded the risk assessment for growth slightly, but reiterated that the (more important) inflation risk assessment remained unchanged.

Key Quotes

“The Governing Council is trying to sound somewhat more optimistic as the year progresses, without immediately startling markets. Meeting again confirmed that the ECB will only take ‘baby steps’ when it changes its communication on the outlook for monetary policy.”

“We believe that this suggests that going forward, the ECB is likely to first only adjust its risk assessment for growth again (but this time to “broadly balanced”), before considering an upgrade of the inflation risk balance. Further upgrades of the growth outlook and/or risk assessment could come as early as June, backed by new growth estimates. We believe these growth estimates could indicate further reduction of the uncertainty surrounding the outlook – and especially the downside risks to growth, given that growth has so far turned out to be more robust than previously expected.”

“Meanwhile, the Governing Council is not yet convinced enough to also upgrade the inflation risk assessment, which also has clear implications for the Council’s stance towards the ECB’s forward guidance.”

“President Draghi confirmed that the ‘easing biases’ communicated in the ECB’s forward guidance relate solely to inflation: “They are meant to cope with tail risks concerning the inflation rate, not growth.” As such, it is highly unlikely that the phrasing of forward guidance will change before the ECB upgrades its risk assessment for the inflation outlook from “downside risks”. Only when the Council can sound more optimistic on the outlook for inflation –i.e. when a similar, gradual change of tone in the inflation risk assessment is presented– do we expect the ECB to reassess the “or lower” phrasing in its forward guidance.”

“Not only did Draghi’s press conference clarify the order in which the ECB’s language will change, President Draghi also reiterated that the sequence in which unconventional policies will be wound down is currently not up for discussion. At this time, the Council does not see any reasons to deviate from the order described in the forward guidance (i.e. tapering the asset purchases before hiking the deposit rate). In our view, the fact that Draghi did not want to go into too much detail when asked questions on potential changes to this order, only confirms that the Governing Council wants to stick to the current sequence of tapering before rate hikes for now.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD extends gains above 1.0700, focus on key US data

EUR/USD extends gains above 1.0700, focus on key US data

EUR/USD meets fresh demand and rises toward  1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data. 

EUR/USD News

USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data

USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data

USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday. 

USD/JPY News

Gold closes below key $2,318 support, US GDP holds the key

Gold closes below key $2,318 support, US GDP holds the key

Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.

Gold News

Injective price weakness persists despite over 5.9 million INJ tokens burned

Injective price weakness persists despite over 5.9 million INJ tokens burned

Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. 

Read more

Meta takes a guidance slide amidst the battle between yields and earnings

Meta takes a guidance slide amidst the battle between yields and earnings

Meta's disappointing outlook cast doubt on whether the market's enthusiasm for artificial intelligence. Investors now brace for significant macroeconomic challenges ahead, particularly with the release of first-quarter GDP data.

Read more

Forex MAJORS

Cryptocurrencies

Signatures