24 Sep 2013
Flash: Dovish ECB should limit EUR upside - RBS
FXstreet.com (Barcelona) - According to Greg Gibbs, FX Trading Strategist at RBS, shares his thoughts in a research note today, saying that the ECB President Draghi latest speech yesterday were relatively dovish.
Key Quotes
"He is attentive to the rise money market rates that may arise due to the early repayment of LTRO funding by banks, suggesting they may act to lower rates."
"In a speech to the EU Parliament he said: “Reliance on ECB funding support has been steadily declining. These improvements are reflected primarily in the on-going advance repayments of funds by several banks which had borrowed from the ECB under the two three-year longer-term refinancing operations. While repayment of central bank credit is certainly a sign of normalisation, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates. We will remain particularly attentive to the implications that these developments may have for the stance of monetary policy.”
"While the ECB tend to be reactive rather than proactive, these comments suggest they are wary of tightening that may arise from a drift up in rates contributing to a stronger EUR. This should act to constrain EUR upside."
Key Quotes
"He is attentive to the rise money market rates that may arise due to the early repayment of LTRO funding by banks, suggesting they may act to lower rates."
"In a speech to the EU Parliament he said: “Reliance on ECB funding support has been steadily declining. These improvements are reflected primarily in the on-going advance repayments of funds by several banks which had borrowed from the ECB under the two three-year longer-term refinancing operations. While repayment of central bank credit is certainly a sign of normalisation, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates. We will remain particularly attentive to the implications that these developments may have for the stance of monetary policy.”
"While the ECB tend to be reactive rather than proactive, these comments suggest they are wary of tightening that may arise from a drift up in rates contributing to a stronger EUR. This should act to constrain EUR upside."