ECB strategy review flop may be euro-supportive, if anything
MUFG Research discusses its reaction to yesterday’s ECB’s strategy review.
“President Lagarde confirmed yesterday that the new strategy
does not have implications on pushing back the timing of when monetary
tightening may come. This begs the question – what was the point in all
of this? If the new strategy does not change the ‘reaction
function’ of the ECB well then why should the markets attach any greater
level of credibility on the ECB achieving the inflation target (that is
now a touch higher) than before?,” MUFG notes.
“In theory the ECB should be doing something different at the next
meeting when this new framework will be live – on 22nd July. But it
won’t and therefore we see little impact for now from this review
announcement. There may have been some modest speculative selling on the
prospect of a more meaningful policy review providing a more dovish
tilt to monetary policy and hence at the margin (we doubt there was much EUR selling on this) this may be EUR supportive,” MUFG adds.
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