More ECB easing isn’t necessarily good for emerging markets – TDS

By FXStreet Cristian Maggio, Head of Emerging Markets Strategy at TDS, suggests that by almost any count, the ECB over-delivered on expectations, though the package announced was largely in line with our own expectations.

Key Quotes

“The fact that all of the policy measures were announced at the same time led to a huge reaction on markets. The ECB announcement has been more positive than not for EMs.

But it seems reasonable to expect that the ECB will now remain on hold in the foreseeable future barring further significant shocks. The Eurozone economy is also far from being out of the woods, at least in terms of potential growth still being too low and the CPI target a distant goal, which suggests that there’s no clear direction for the EUR going forward, and the wide trading range seen between 1.07 and 1.14 that has prevailed for much of the last several months remains intact.

It also means that the market may decide at some point to start positioning for more hawkish monetary policy decisions in Europe, if above potential growth pushes inflation closer to target despite its growth rate still being modest in absolute terms. This would be negative for EMs to a similar, …read more

Source:: FX Street