BNY Mellon: ECB & Expectations Management
BNY Mellon: ECB & Expectations Management
BNY Mellon: Neil Mellor, Senior Currency Strategist, BNY Mellon
BNY Mellon: Neil Mellor, Senior Currency Strategist, BNY Mellon
It is perhaps testimony to the economic problems facing the euro-zone that the EUR had made its way back below 1.13 to the USD this week despite growing speculation about the return of the Fed “put”. A reversal of the EUR’s recent downtrend will not help the ECB’s cause.
The BTP market may have downgraded Italy’s budget drama from red to amber, but there are undoubtedly many more acts to follow, and as things stands, which party ultimately prevails is difficult to predict. But of course, even if Italian budgetary discord were replaced with harmony, the ECB would still face a stiff challenge in ending its asset purchase program given Italy’s dependence upon it. Fitch also reminded us recently that ECB debt purchases of pan-eurozone debt have far outweighed net issuance since 2015.
Yet if this were not enough of a test for Mr Draghi and his team, the eurozone economy has clearly relinquished its impetus from earlier in the year. Italy is struggling along at stall speed