ECB Review: Draghi, a bull in dove’s clothing – TDS

Analysts at TDS note that the ECB left rates, QE, and forward guidance all unchanged at this week’s meeting, as had been fully expected.

Key Quotes

“The question for us going into the opening statement was what the ECB would say about the balance of risks around growth, which were found to still be tilted to the downside, but the language is getting closer to balanced. Draghi once again sounded more upbeat on the outlook for growth, both domestically and abroad.”

“In the press conference though, Draghi sounded increasingly comfortable with the forward guidance as is, and while consensus is looking for the ECB to drop the “or lower” guidance on rates in June, it’s not clear that this is the most likely outcome.”

“Because of this, markets took a slightly dovish view of today’s ECB decision, with bund yields slipping from a high of just over 0.36% during the more upbeat opening statement to 0.33% by the end of the press conference, while the EUR followed a similar path, slipping from a high of 1.0933 to around 1.0870.”

“FX Outlook & Strategy: We see notable risks that the recent rally in EURUSD has run out of steam – for now. We simply do not think investors have enough justification to chase a push above 1.0950 should one occur. As a result, this leaves EURUSD looking a little toppy for the time being.”