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13 Feb 2014
Flash: EUR higher despite dovish words - BBH
FXStreet (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman explained and said "It is really the euro's gains that are the least obvious".
Key Quotes:
"Yesterday's pullback was sparked by the ECB's Coeure using the strongest words to date to play up the possibility of a negative deposit rate, saying that the ECB was "seriously thinking" about it."
"The ECB's Coene did seem to play it down, but Coeure's comments fanned expectations that the ECB will take fresh action in a few weeks. Action could be supported by the fact that the March ECB meeting will see updated staff forecasts, which will include 2016 for the first time."
"Some observers have argued that the 2016 forecasts could be used to justify a policy shift, but today's ECB's monthly report contains a strong hint that such speculation may prove for naught. Specifically, 2016 HICP (harmonized inflation measure) projection by professional forecasters in the ECB survey estimated 1.7%, seemingly supporting the official claim that deflation is not a threat."
"It will underpin a decision not to take a potentially highly disruptive act of a negative deposit rate. The survey did see this year's 1.5% forecast made in Q4 cut to 1.1%."
Key Quotes:
"Yesterday's pullback was sparked by the ECB's Coeure using the strongest words to date to play up the possibility of a negative deposit rate, saying that the ECB was "seriously thinking" about it."
"The ECB's Coene did seem to play it down, but Coeure's comments fanned expectations that the ECB will take fresh action in a few weeks. Action could be supported by the fact that the March ECB meeting will see updated staff forecasts, which will include 2016 for the first time."
"Some observers have argued that the 2016 forecasts could be used to justify a policy shift, but today's ECB's monthly report contains a strong hint that such speculation may prove for naught. Specifically, 2016 HICP (harmonized inflation measure) projection by professional forecasters in the ECB survey estimated 1.7%, seemingly supporting the official claim that deflation is not a threat."
"It will underpin a decision not to take a potentially highly disruptive act of a negative deposit rate. The survey did see this year's 1.5% forecast made in Q4 cut to 1.1%."