The European Central Bank’s decision to taper bond purchases is a shot in the arm for the euro, analysts say, and as Bloomberg reports, while policy makers say they may still expand the size or duration of quantitative easing, investors may be inclined to be skeptical.
Frederik Ductozet, economist at Pictet WM
- “The decision to extend QE at a slower pace, but for longer, is likely to be bad news for markets as the program will no longer be perceived as being open-ended
- ‘‘We need to see the details in terms of flexibility, i.e. under which conditions the ECB may decide to increase the pace of purchases again, but it remains to be seen if the markets will buy such a commitment”
Valentin Marinov, strategist at Credit Agricole
- Back-of-the-envelope calculations based on the ECB statement shows EUR540b of expansion under the new regime, compared with EUR480b if they were to do EUR80b for six months. This is really a month worth of buying difference
- The important thing for the euro is what they will do with the deposit floor on asset purchases; if they don’t remove it, the euro may gain more
Peter Chatwell, strategist at Mizuho International
- Based on back-of-the-envelope calculations, this is approximately EUR100b less QE in 2017 than we had expected
- “Lower for longer should be the overall rate move once the shock has dissipated”
Roberto Cobo Garcia, Peter Frank, strategists at BBVA
- This is definitely a bullish outcome for the euro
- The extension of QE for nine months is a little more accommodative, but clearly to start tapering back the size of QE in April “is a big shock”
Athanasios Vamvakidis, strategist at BofAML
- This is QE tapering and a disappointment for markets
- “Less QE for longer is still a weaker QE. In any case, the markets weren’t expecting the ECB to stop QE next year”
- Euro started the day higher, and it seems that the market was already positioning for some disappointment; beyond the short-term market reaction, today’s decision is positive for euro, keeping everything else constant
Aurelija Augulyte, strategist at Nordea
- The ECB’s decisions represent a “balanced move"; overall it is ‘‘a taper’’ but in disguise it is a larger QE, since the total comes to 540b against a consensus of 480b from April