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3 Sep 2015
ECB likely to crystalize the need for further stimulus - BAML
FXStreet (Delhi) – Analyst at Bank of America Merrill Lynch, believe that the ECB is likely to announce the need for further stimulus in today’s meet in order to achieve its inflation target.
Key Quotes
“The ECB today is likely to crystalize the need for further stimulus to meet the inflation target, and our European economists expect a “pre-announcement" of action. This should support receivers in EEMEA, but investors are unlikely to take risk before the US payrolls on 4 September and the Fed on 17 September where our US economics team still expects a 25bp hike.”
“A “dovish hike” would support our receiver views in EEMEA, but a hike with a statement suggesting further hikes near term would be a major risk to these positions.”
“The most likely upshot of the China/commodity shock is lower inflation. In contrast, the other implications markets are partially pricing–pressure on FX debt on balance sheets and a need for central banks to shore up their currencies–are less convincing.”
Key Quotes
“The ECB today is likely to crystalize the need for further stimulus to meet the inflation target, and our European economists expect a “pre-announcement" of action. This should support receivers in EEMEA, but investors are unlikely to take risk before the US payrolls on 4 September and the Fed on 17 September where our US economics team still expects a 25bp hike.”
“A “dovish hike” would support our receiver views in EEMEA, but a hike with a statement suggesting further hikes near term would be a major risk to these positions.”
“The most likely upshot of the China/commodity shock is lower inflation. In contrast, the other implications markets are partially pricing–pressure on FX debt on balance sheets and a need for central banks to shore up their currencies–are less convincing.”