16 Jan 2015
Credit Suisse: ECB QE nearly here – eFXnews
FXStreet (Barcelona) - The eFXnews Team shares Credit Suisse’s view on the probable scenarios of the ECB QE.
Key Quotes
“We attach a high 70% probability to QE in the form of sovereign bond purchases being announced next Thursday given the amount of ECB speak preparing the ground throughout the holiday season and in the run-up to the January meeting”
“We attach the lowest probability, merely 10%, to the ECB surprising to the upside on the amount, that is purchases exceeding €750 bn or even €1 tn or more.”
“But we also believe that there will be an inverse relationship between the ECB sharing risk and the amount of purchases involved. The lower the amount, the higher the likelihood that losses will be shared according to the capital key whereas the probability of no loss sharing or doing a more messy split partly sharing risk and leaving the rest to national central banks (NCBs) and thus national governments increases the higher the amount.”
“Drawing it all together, we conclude that the ECB compromising on size rather than risk would be preferable, although within that scenario the door to do more is hopefully left wide open."
"We believe the market response would be more positive if the ECB embarks on a proper euro area monetary policy operation entailing the sharing of risk rather than singling out periphery countries by not willing to compromise. The latter would be hardly conducive to successfully starting the longawaited euro area QE.”
Key Quotes
“We attach a high 70% probability to QE in the form of sovereign bond purchases being announced next Thursday given the amount of ECB speak preparing the ground throughout the holiday season and in the run-up to the January meeting”
“We attach the lowest probability, merely 10%, to the ECB surprising to the upside on the amount, that is purchases exceeding €750 bn or even €1 tn or more.”
“But we also believe that there will be an inverse relationship between the ECB sharing risk and the amount of purchases involved. The lower the amount, the higher the likelihood that losses will be shared according to the capital key whereas the probability of no loss sharing or doing a more messy split partly sharing risk and leaving the rest to national central banks (NCBs) and thus national governments increases the higher the amount.”
“Drawing it all together, we conclude that the ECB compromising on size rather than risk would be preferable, although within that scenario the door to do more is hopefully left wide open."
"We believe the market response would be more positive if the ECB embarks on a proper euro area monetary policy operation entailing the sharing of risk rather than singling out periphery countries by not willing to compromise. The latter would be hardly conducive to successfully starting the longawaited euro area QE.”