EUR: ECB-QE no cornerstone for the development cooperation economy, still points to a decline in the EUR
The European Central Bank lowered interest rates by 10bp on Thursday, announcing monthly bond purchases of EUR 20bn (without time limit), a staggering system and a revaluation of cheap loans called Targeted Long-Term Refinancing Operations (TLTROs). , The Euro (and the Eurozone) "enjoyed" a roller coaster ride in the intraday course. Following the announcement, the pair suffered a knee-jerk decline to 1.0930, which is likely due to the "open" nature of the announced quantitative easing. However, Mario Draghi's press conference was unable to feed EUR bears, since he admitted that there had been no discussion of revising the asset purchase limit. This was probably an eye-opener for markets that fell in EUR long positions, pushing the currency well above pre-meeting levels. A stronger EUR confirms the notion that the ECB is underperforming compared to very subdued market expectations. Looking ahead, however, we expect the single currency to move in the opposite direction and we continue to see EUR / USD in the range of 1.05 to 1.10 for the remainder of the year. The main reason for this is that the package provided by the ECB may not be enough to trigger a turnaround in the weakened Eurozone economy and cautious inflation outlook, suggesting that the end of monetary stimulus is not in sight. The US growth differential is expected to remain substantial (despite signs of slowing US activity), and this should also apply to the spread, as some resilience of US inflation (and the risk of stagflation) point to a less aggressive easing of the Fed could advance. The EUR / USD is likely to be followed by the highly correlated Central and Eastern European FX segment. For today, the EUR should keep its profits.