ECB: Oh Lord, don’t let me be misunderstood? - ING

"Without saying anything new, ECB president Draghi moves markets. But probably not in the intended direction," argue analysts at ING.

Key quotes

Obviously,  Draghi went into today’s press conference highly determined to convey an unchanged message and to get the genie of speculation about the timing of an end to QE back into the bottle. At the same time, the ECB must have had the intention of dampening the recent euro appreciation. Judging from the imminent market reaction, the ECB will not be satisfied.

Mario Draghi might think of the lyrics of an old song by The Animals “I’m just a soul whose intentions are good. Oh Lord, please don’t let me be misunderstood”. In fact, the development in the euro exchange rate and bond yields since the December meeting has already led to a less accommodative monetary policy stance.

We would not be surprised if ECB officials start a dovish communication wave in the coming weeks. If markets get ahead of themselves, chances of another extension of QE rather than an early end are increasing.

Looking through the short-term market noise, we stick to our base case scenario of at least another ‘lower for longer’ beyond September, before putting QE probably to an end in December.