ECB tone is likely to be dovish and may sound worried – Danske Bank

By FXStreet FXStreet (Delhi) – Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank, expects the ECB to sound dovish and slightly worried at its upcoming meeting as the impact of lower oil price together with the stronger effective EUR are challenging the ECB’s outlook for a sustained adjustment in inflation.

Key Quotes

“Already in the introductory statement we expect a more dovish tone from Draghi. Firstly, we expect him to include a sentence emphasising the open-endedness of the QE programme and secondly, we believe he will add that the ECB is ready to use all available instruments if needed.”

“Moreover, Draghi is likely to put a lot more focus on the downside risks to the economic outlook following the latest developments in China together with the sell-off in equities.”

“Currently, we see a low probability of the ECB delivering imminent easing and we believe the ECB will first attempt to improve the inflation outlook by verbal intervention.”

“The market is increasingly speculating on the ECB increasing its asset purchases and the theme is likely to continue based on a dovish stance from the ECB.”

“The ECB’s inflation projection for 2017 could be crucial for how the market reads the ECB. We expect a slightly lower forecast for 2017, …read more

Source:: FX Street