New cycle lows in Eurozone inflation along with disappointing ISMs across various nations raise the probability of a dovish ECB meeting tomorrow, in Citi’s view. However, as Deutsche expands upon, they do not see an obvious trigger for “actual” policy easing in the data and events since the last ECB Council meeting and any “action” will take the form of words, not deeds. Despite all the hope in the world, Deutsche warns there would have to be a substantive deterioration relative to current forecasts to elicit an asset purchasing/QE response from the ECB. Instead, more comments on Euro strength, stronger forward guidance, confirmation of the magic of OMT are more likely but so far the market is absolutely calling Draghi’s bluff and saying ‘put-up-or-shut-up’ especialy in terms of EUR strength.
The FT does a great succinct explanation of where we are and what expectations are…
Citi seems a little more hopeful for a dovish ECB meeting and lays out a few reasons why (and what that ‘dovishness’ might look like)…
