Jacqui Douglas, chief European macro strategist at TD Securities, explains that the ECB disappointed on the headline numbers themselves, with a 10bps rate cut and only €20bn of QE, but exceeded on the forward expectations by effectively shifting to QE infinity which will run until the inflation outlook robustly converges to close to 2%, and almost right up until the point they are ready to hike rates.
“Importantly, while there is only €20bn/month in buying, the stock announced, if you are to believe the ECB's and consensus forecasts, implies it could be around €500bn in QE that will be delivered and likely running well into 2021, all depending on the inflation outlook.”
“The word-something is obvious and will likely increase the headline volatility in the coming months as both the hawks and doves can talk up their preferred timing and delivery of this policy and the onus is now on the press conference today for Draghi to reinforce what the collective expectation will be.”
“Still to come in the press conference will be details on how tiering will work, whether they have made changes to the buying limits on QE, and the changes to the macro forecasts which still have scope to turn this initial dovish market interpretation around.”
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.