ECB: Will Draghi deliver? – Rabobank

Sandeep Kanihama FXStreet Contributor

Piotr Matys, emerging markets FX strategist at Rabobank, suggests that all eyes on Thursday will be on ECB President Draghi whose era is coming to an end as in November he will hand it over to Lagarde (former IMF chief).

Key Quotes

“Market expectations are very high that the ECB will reveal a comprehensive stimulus package.”

“Our ECB watchers Bas van Geffen and Elwin de Groot anticipate a wide range of easing measures including a 10bps deposit rate cut; forward guidance tied to the duration of asset purchases (i.e. rates to stay at present or lower levels until ‘well past’ the end of net asset purchases); and a EUR 40bn per month asset purchase programme running for 12 months starting from October.”

“An initial response from the CEEMEA currencies – particularly the Polish zloty and its peers due to their strong ties with the Eurozone – is likely to be positive if the ECB announces a major package of monetary policy stimulus. That said, we do not anticipate an outburst of optimism that will trigger a sustainable wave of capital inflows into the CEE assets. There seems to be growing scepticism about the ability of central banks to offset the negative impact of trade war.”

“Essentially, there is a risk that QE could be delayed or watered down leaving the markets disappointed with the Polish zloty and other currencies in the CEE affected the most.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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