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13 Sep 2013
Flash: The ECB still has tools; risk to EUR/USD - BAML
Flash: FXstreet.com (London) - Research teams at Bank of America Merrill Lynch said the The ECB is holding its tools for supporting short-term growth in reserve for now.
Key Quotes:
“18 September matters for the ECB: more tapering than we expect with adverse consequences for the Eonia curve would put the ECB in a difficult position”.
“Should markets move to the point of threatening the fragile recovery, the ECB would come under more pressure to act”.
“In this event, the ECB could still inject liquidity through an LTRO, cap the repo rate on the upside, or even narrow the
corridor and bring the refi rate down further”.
“But it would only do so if the recovery looked to be derailed”.
“Otherwise, we would expect the ECB to continue monitor the recovery, with no hope of seeing credit data picking up before H2 2014 (in our view, credit could pick up before in France or Germany, where the banking sector has fewer NPLs)”.
Key Quotes:
“18 September matters for the ECB: more tapering than we expect with adverse consequences for the Eonia curve would put the ECB in a difficult position”.
“Should markets move to the point of threatening the fragile recovery, the ECB would come under more pressure to act”.
“In this event, the ECB could still inject liquidity through an LTRO, cap the repo rate on the upside, or even narrow the
corridor and bring the refi rate down further”.
“But it would only do so if the recovery looked to be derailed”.
“Otherwise, we would expect the ECB to continue monitor the recovery, with no hope of seeing credit data picking up before H2 2014 (in our view, credit could pick up before in France or Germany, where the banking sector has fewer NPLs)”.