ECB: The temperature will rise only in July – Nordea Markets

According to Tuuli Koivu, Research Analyst at Nordea Markets, it is likely that the ECB will take decisions regarding its monetary policy only in July as in the meantime, the ECB will concentrate on analysing the incoming data.

Key Quotes

“The ECB did not make any changes to its monetary policy stance. Both the forward guidance regarding the interest rates and the strong link from inflation developments to asset purchases were kept unchanged.”

“However, it was a surprise that Draghi pointed that monetary policy was not discussed per se at the meeting at all. As a result, Draghi did not hint that any significant decisions could take place in the June meeting either. This increases further the probability that the next significant changes for monetary policy will be made only in the July meeting.”

“Draghi noted that the risks stemming from rising protectionism had increased, while recent data pointed to some moderation in growth, but the recent developments had not so far impacted the ECB’s confidence in seeing progress towards reaching the inflation target.”

“Assuming no big surprises from the inflation side, the only reason for earlier decision making is that the next round of staff projections will be published in June. However, the ECB has not been keen on tying its decision making to that timetable. So, be prepared when making your holiday plans for July!”

“Market reaction to the ECB press conference was muted, and recent market drivers remain in place.”

“We expect further inflation divergence to pull EURUSD down in the coming months. The Euro-area interest rate environment is unlikely to change significantly any time soon.”