ECB maintains course, June in focus now – BBH

The ECB's initial statement that accompanied the announcement of no change in rates or the pace of asset purchases was as expected, according to Marc Chandler, Global Head of Currency Strategy at BBH.  

Key Quotes

“The ECB will continue to buy 30 bln euros a month until the end of September ("or beyond if necessary").  It kept the conditionality of ending its purchases intact: "until the Governing Council sees a sustained adjustment in the path of inflation" consistent with its target of near but below 2%.”

“The other element of forward-guidance related to interest rates.  As the ECB has stated before, rates will stay at present levels for an extended period of time and "well past" the end of the net asset purchases.  We suspect this means around six months or so after the purchases stop, which would be around mid-2019 and still likely before Draghi's term expires in October 2019.”

“Draghi acknowledged that the economy has moderated but remains broad and solid and sufficient to keep the ECB confident that inflation will converge toward its target.”

“The ECB reiterated that the risks to growth are balanced.  The risks that Draghi specifically cited were on the downside.  This is may be one of the few clouds in the silver lining that Draghi depicted.”

“The euro spiked down to almost $1.2146, briefly falling through the March 1 low.  It quickly snapped back to trade at new session highs a little above $1.2200.  We suggest potential toward $1.2240-$1.2260.”