ECB Minutes now published 17 Aug

  • accommodation required in either direction if needed
  • rate setters expressed concern about possible market overshooting, notably in FX
  • stock vs flow aspect of app should be considered

No sign of hawkish tones plus concern over recent fx appreciation sends euro lower.

EURUSD 1.1662 lows EURGBP 0.9063 EURJPY 128.55 EURCHF 1.1305

  • Regarding exchange rates, while it was remarked that the appreciation of the euro to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-à-vis the rest of the world, concerns were expressed about the risk of the exchange rate overshooting in the future. On euro area bond markets, it was observed that while a general repricing had occurred across jurisdictions, spreads had remained contained, suggesting that the euro area had become more resilient, including the more vulnerable economies. In global bond markets, the recent flattening of the US yield curve had contributed to an easing of global financial conditions.
  • medium to longer-term inflation expectations, meanwhile, had remained stable over the previous few weeks, despite a fall in oil prices. This implied that the changes in nominal bond yields largely reflected changes in real yields, which could also be seen as consistent with improved growth and, ultimately, inflation prospects.

  • The economic upturn had gathered some further momentum. Risks to the growth outlook were broadly balanced, with some upside risks to the short-term outlook. Downside risks mainly related to global factors.

  • At the same time, euro area HICP inflation was still subdued. Measures of underlying inflation had remained low and were yet to demonstrate convincing signs of a pick-up, as domestic cost pressures, including wage growth, remained muted.

  • Overall, financial conditions remained supportive of the economic expansion, although the repricing in some financial market segments, in particular in foreign exchange markets and the bond markets, had led to some deterioration since the previous meeting

Full Minutes from the ECB here ( saves me typing and you can all read faster than I can type!)

ECB rate setters express concern about overshooting, notably in FX