Increases to QE on the cards from ECB? – Danske

By FXStreet FXStreet (Guatemala) – Analysts at Danske Bank explained that in terms of available instruments, Draghi put most focus on the flexibility of the QE programme, as he emphasised it could be extended beyond September 2016 and/or the ECB could increase monthly purchases.

Key Quotes:

“In terms of further cuts in policy rates, Draghi said that the ECB did not discuss whether it had reached the lower bound on policy rates and based on this we stick to our expectation that it is more likely that the ECB will extend its QE programme than that it will cut policy rates.

“The dovish message was well received by the market, with a broad-based rally in fixed income driven by the 5Y and 10Y segment. We interpret the reaction to the change in the ISIN limits as well as the Governing Council judging it ‘premature’ to conclude on the downside effects on growth and inflation expectations as the market building up expectations for the QE programme to be scaled up or extended. In our view, this is a signal Draghi clearly wanted to send.”
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Source:: FX Street