ECB dovish or hawkish? - Rabobank

Analysts at Rabobank explained that the price action that followed last Thursday’s ECB decision suggested bond markets had interpreted the lowering of the monthly purchase rate as a hawkish signal, driving the Bund curve sharply higher.

Key Quotes:

"Meanwhile, there was also a pronounced weakening of the euro and a rally in equities – both indicative that more stimulus than expected had been announced."

"The question was of course which response was correct? With an increase in demand for govvies, supra, agency and sub-sovereign debt, we suggest that the announcement is perhaps the Bank’s attempt to engineer a ‘soft tapering’, to adjust the market’s expectations and eventually, slowly but surely move the programme toward a conclusion without actually referring to a US-style, hard deadline tapering of the PSPP."