ECB Delivers for at least 9 months


ECB extends QE for 9 months at EUR 30 bln. This is down from currently EUR 60 bln, but the ECB also maintained the option of extending in size or duration if needed, so there still is no firm end to QE and the easing bias on asset purchases remains in place as we expected. All in all pretty much in line with expectations and maintaining an overall dovish stance, despite the fact that monthly asset purchases will be halved form next year. That still adds a further EUR 270 bln to the central bank’s balance sheet and with no firm commitment to an end date for asset purchases. Rates were of course also kept on hold and the central bank repeated again that rates will remain at low levels well past the end of asset purchases, which should exclude rates rates before early 2019 at the earliest. After both Markit PMIs as well the Ifo reported mounting capacity pressures, we saw a good chance that the hawks at the ECB would win out and that monthly purchase volumes would be cut back even further, so this is somewhat more dovish than we expected and what markets positioned for this week, which meant Bund futures jumped higher on the announcement.

EUR crosses, having been bid up all morning took an immediate hit. EURUSD fell from the morning high at 1.1830 to sub 1.1750, EURJPY  broke below 134.00 and EURGBP dipped below 0.8900.  Mr Draghi just getting to his feet.


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