ECB: Patience, prudence and persistence to remain the guiding principles – Danske Bank

Analysts at Danske Bank explain that yesterday’s press conference did not provide new information about the next change in the forward guidance and the introductory statement was somewhat balanced, as growth was still deemed solid and broad-based, but also pointing to some moderation of late.

Key Quotes

“Rising protectionism was mentioned as a downside risk.”

“The GC remains cautious about reading the developments behind the growth moderation. However, despite the acknowledgement of a loss of growth momentum, Draghi tried to downplay the implications, stressing that the ECB has unchanged confidence in the convergence of inflation towards its aim. Although inflation measures have moved sideways without a clear upward trend, Draghi mentioned encouraging signs that wage growth has picked up, which might support price pressures in coming months.”

“With the ECB eager not to steer any new EUR direction amid cyclical weakness and trade uncertainty, we continue to stress that EUR/USD remains at risk from stretched positioning and US cyclical outperformance on growth and rates alike. These USD positives could put the 2017 high of 1.2092 at risk in coming months and we still see the pair as a tactical sell on rallies short term. That said, we remain strategically long the cross via options for a move towards the high 1.20s in 6-12M.”