ECB coming your way soon – BBH

Research Team at BBH, suggests that the ECB meeting is one of the highlights of today's sessions while the ECB's focus has been on implementing the rest of its package of measures, like the corporate bond purchase program and the TLTRO. 

Key Quotes

“There are two issues that many investors may wish would be settled, but from the ECB's point of view, there may be less urgency to decide now. 

First, will the ECB extend its QE past the current March 2017 soft end date?  This can be decided after the summer when the staff forecast will be available, and more data will be in hand.  It can be decided in Q4 as well. 

Second, with the further drop in interest rates since the UK referendum, more bund yields are below the deposit rate, which excludes them from the ECB purchase program.  Many think the shortage is so acute that the ECB must decide something this week as September is being viewed as too late.  We are less convinced that the ECB will feel their sense of urgency.  And many observers seem too quick to suggest jettisoning the capital key criteria of the purchases.  There are other measures that can be explored first that are less extreme. 

The euro dipped below $1.10 yesterday for the first time since June 27.  It has been confined a half-cent range above that floor today.  Anticipate of Draghi either talking it down or being dovish may have weighed on it.  There seems to be scope today then for sell the rumor, buy the fact type of activity.”