EUR: What To Expect From The ECB? – Views From 10 Major Banks
The following are the core expectations for the ECB March policy meeting as complied from the research and strategy of 10 major banks;
Barclays: The ECB is likely to note that risks to its outlook are more balanced but also remain committed to significant monetary easing, which should keep the EUR under pressure, in our view.
Morgan Stanley: The ECB will likely present upwardly revised inflation forecasts and acknowledge that growth is getting better. While the overall tone is likely to remain dovish, we expect the central back to become more balanced and announce a further trimming of the QE programme later in the year.
Westpac: The ECB is unlikely to alter its stance when it meets on Thursday. In fact, the continuing need for recapitalisation in the banking sector and the weight of NPL’s in the Eurozone suggest that current accommodation remains appropriate.
Standard Chartered: ECB is likely to nudge the 2017 GDP forecast up to 1.8% (from 1.7%), inflation up to 1.8% (from 1.3%). It is too early to signal further tapering, though the swift drop in unemployment will likely be noted.
RBC: The main point of interest in this week’s ECB meeting will be changes in language, with a number of voices calling for a change to the ECB’s forward guidance. An updated set of staff projections, which are likely to see an upward revision to inflation estimates, will add weight to those calls. Our economists, however, think the ECB will stick to its guns, looking through the energy-driven rise in inflation.
SEB: We expect the ECB Governing Council, at its upcoming meeting on 09 March, to resist mounting public and internal demands for an exit from QE and instead confirm the monetary policy course for full 2017 which it had mapped at the December 2016 meeting. However, updated ECB staff projections should convey a more optimistic outlook for Eurozone GDP growth and inflation.
Nordea: We do not expect any changes to the ECB monetary policy when the Governing Council meets on 9 March…In an environment where longer bond yields are trading towards the lower end of their recent trading range, headline inflation has reached the ECB’s target and the first ECB tapering step is around the corner, we find markets remain more vulnerable to a slightly hawkish than a dovish message. Hawkish words thus have potential to lift long yields and boost the EUR compared to the size of the opposite moves in case the ECB retained a dovish tone.
BofA Merrill: We think the current “truce” between the hawks and doves will be reflected in a dovish tone by Draghi this week, with no decision. After the summer, though, we think a proper debate about the future of QE will be unavoidable. We expect the ECB meeting to be a non-event for the Euro
Danske: We expect the ECB to maintain its dovish stance at the meeting this week although inflation has reached the 2% target. The reason why we do not expect the ECB to react to the stronger inflation figure is that it is driven by the volatile energy and unprocessed food price inflation, whereas the underlying price pressure remains weak.
Credit Agricole: This week’s main focus will be on the ECB’s monetary policy announcement. While we do not exclude the possibility of the central bank considering a change to its forward guidance by indicating that the lower bound in rates has been reached, such prospects will unlikely come as a major surprise to markets and therefore they will only have a limited currency impact at best. Hence, we remain of the view that broader rallies should be sold.