ECB: July meeting was a non-event for FX markets – Danske Bank

The first meeting since the strategy revision of the European Central Bank (ECB) meeting offered no surprises. According to analysts from Danske Bank, it was a non-event for the currency market. They point out the new strategy is more focused on the duration of the accommodative policy stance and not the size of the support.

Key Quotes: 

“ECB’s first meeting since the new strategy took effect was mostly about aligning the language from the June decision to the review outcome. The bond buying (APP and PEPP) guidance were unchanged.”

“The main new element worth highlighting is the forward guidance on rates stating that inflation has to reach ‘two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon’ which compares ‘to the end of the forecast horizon’ in June. This also means that the new strategy is more focused on the duration of the accommodative policy stance and not the size of the support.”

“The ECB meeting was a non-event for FX markets. The EUR initially found its clue from relative EUR fixed income performance but during the press conference the single currency stabilised at close to unchanged levels for the day. Looking ahead, we strategically favour more EUR/USD downside but emphasise that this is much more a play on USD real rates, global inflation exposure and global cross asset moves than it is a play on ECB monetary policy.”