ECB officials are ready to drop the reference to downside risks – Deutsche Bank

The research team at Deutsche Bank notes that there was a bit of interest in a Reuters report which suggested that ECB officials are ready to drop the reference to downside risks in their statement at the meeting on June 8th and instead replace it with “largely balanced”.

Key Quotes

“The article also suggested that the ECB will debate the removal of its easing bias. None of this appeared to be a great surprise though and the Euro was quick to pare back a small jump.”

“Our global FX strategists published their latest FX Blueprint. The most notable takeaway for us is their EUR/USD view which they expect to hold at the top end of the 1.05-1.15 range given European data surprises at positive extremes versus the US, a soft ECB tapering already appearing priced in, European equity valuations shifting to being expensive versus the US and unhedged equity inflows approaching previous peaks. On the US side the path of monetary policy looks mis-priced in their view while the euro has already overshot relative to short-term rate differentials. They expect the Euro to gravitate back to 1.10 over the summer.”