15 Apr 2014
Conditions for sustained EUR depreciation not in place - ANZ
FXStreet (Bali) - According to Brian Martin, Senior European Strategist at ANZ, conditions for sustained EUR depreciation do not seem to be in place, despite the verbal campaign by the ECB.
Key Quotes
"For the ECB, its job of putting a floor under prices will remain a challenge especially if it is looking to the exchange rate to help achieve that."
"The conditions for a sustained depreciation in the euro do not seem to be in place and attempting to manufacture a weaker currency is difficult. Maybe attempting to cap the euro during this period of low inflation is the best that can be hoped for."
"The ECB again implied at the Spring IMF meetings that from an inflation perspective it would prefer a weaker euro, but reiterated that it does not target the exchange rate."
"The introduction of a negative deposit rate would clearly be aimed at targeting the exchange rate and we do not see that as central case. Nor are we convinced that the ECB is ready to implement QE just now (if at all)."
"A bounce back in April inflation towards 0.9% y/y from March's low of 0.5% y/y is probably needed to prevent the ECB from taking action next month with a refi rate cut and possibly leaving SMP purchases unsterilized."
Key Quotes
"For the ECB, its job of putting a floor under prices will remain a challenge especially if it is looking to the exchange rate to help achieve that."
"The conditions for a sustained depreciation in the euro do not seem to be in place and attempting to manufacture a weaker currency is difficult. Maybe attempting to cap the euro during this period of low inflation is the best that can be hoped for."
"The ECB again implied at the Spring IMF meetings that from an inflation perspective it would prefer a weaker euro, but reiterated that it does not target the exchange rate."
"The introduction of a negative deposit rate would clearly be aimed at targeting the exchange rate and we do not see that as central case. Nor are we convinced that the ECB is ready to implement QE just now (if at all)."
"A bounce back in April inflation towards 0.9% y/y from March's low of 0.5% y/y is probably needed to prevent the ECB from taking action next month with a refi rate cut and possibly leaving SMP purchases unsterilized."