The ECB Minutes and the surge in euro - analysis from Barclays

Author: Eamonn Sheridan | Category: Central Banks

The euro rocketed higher after the reelase of the European Central Bank minutes

New ForexLive legend Justin had the news as it hit:
Commentary (in brief) via Barclays (bolding mine):
  • minutes ... confirmed ... a broad consensus within the GC on the better orientation of the economic and inflation outlook
  • However, given the ongoing acceleration in the pace of economic expansion and the slow improvement in the inflation outlook, there is also a broad agreement that the forward guidance will have to be adjusted gradually; accordingly we expect a first step in this direction at the April or June meeting.
  • We maintain our call that the ECB will likely end QE before year-end, possibly as early as September, and proceed with a first depo rate increase by 20bp in Q4.·     
There was more, but that is the gist of the Barclays note.

I'll just add in this bit, specifically on EUR (bolding mine):
  • The GC also noted that the appreciation of the euro since the beginning of 2017 does not seem to have adversely affected the pace of external demand for euro area products, and concluded that the negative risk for growth and inflation stemming from the exchange rate repeatedly emphasized during past meetings had receded.
  • Moreover, Benoît Coeuré mentioned in his introduction on financial market developments that, although the market remained positioned for an appreciation of the euro, portfolio rebalancing flows out of Europe probably enabled the broad stabilization observed between September and December.
  • We think that, provided that the euro does not appreciate sharply and quickly in the coming months, the GC is likely to downplay FX volatility going forward.
 I should probably file this under "If you are a central banker here is how to send the value of your currency much higher"

HI Benoit, come inside, the EUR fire is heating things up nicely


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