A few quick thoughts on today’s Mario Draghi show at the ECB

It should be a nothing meetings but there will be a couple of key points that could be price sensitive.


The new staff projections will show us how the ECB see the economic future. It’s been cut, cut, cut for a long while now so it won’t be a surprise if they cut again but realistically, they probably won’t tinker with growth too much as forecasts are already low. Current GDP projections are for 1.1% 2019, 1.6% 2020, 1.5% 2021. Dec projections were 1.7%, 1.7%, 1.5%.
CPI is currently 1.2%, 1.5%, 1.6% vs 1.6/7/8% in the Dec numbers.
Overall, 2019 forecasts will likely stay the same and it will be 2020/21 that will see any changes. That will likely be price neutral for EUR unless there’s big changes to 2020/21. If 2019 is cut at all, that will put pressure on EUR. Q1 growth was confirmed today at 1.2% y/y so already above forecast, an thus there’s no real reason to cut this year’s forecasts. We might even get an upside surprise, slim though that maybe. If we do, the euro could rally a touch.


TLTRO’s – We should get greater detail on these but unless there’s some big numbers bandied about in terms of loan amounts or incentives for banks to borrow, there shouldn’t be anything market moving. The real clincher for these new operations will be in the size of the take up when they go online in Sep. For now, we’ll just get more technical details but they should be pretty much in line with the previous operations. But, we should be ready for any surprises.

Aside from that, it’s really whether we get any additional messages about the path of rates. We’re at …expect them to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. so, EUR will move with any change to that. There’s zero to no chance they bring the date forward so it will be if they push that view further into 2020

I suspect the ECB is going to be heavily reliant on what the take up of the TLRTO’s is going to be like, and how that effects the economy. That alone means we’re looking at probably 6 months before that effect is seen and that’s starting from September. Looking at it that way, unless the economy/inflation bounces between now and the end of the year, we’re most definitely going to see them kick their rate path expectations well into 2020 at some point. But, all that might come nearer Sep.

Overall, I think this is one of those nothing meetings and we’ll all be bored by the 3rd question. I don’t see EURUSD moving more than 50 pips either side of where it’s at going into the presser. As always though, we stand ready to jump on to anything unexpected. Outside of any big news.

Good luck if you’re trading it.

Ryan Littlestone

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