Group Economics
Daily Insight
Macro & Financial Markets Research Nick Kounis, Aline Schuiling & Kim Liu
ECB signals more QE
+31 20 343 5616
3 September 2015
The ECB looks set to step up its QE programmes before long President Draghi announced a lower 2017 inflation forecast as well as downside risks More QE will probably take the form of higher monthly purchases
The exceedingly dovish Mr. Draghi
ECB reduces inflation forecasts
ECB President Mario Draghi struck a very dovish tone during
% yoy
Thursday’s press conference. He said recent that
2.0
1.8
developments pointed to a ‘weaker economic recovery and slower increase in inflation rates’. In addition, ‘downside risks’ had emerged for both growth and inflation. Given recent
1.7
1.5 1.5 1.1 1.0
volatility in financial and commodity markets, the Governing Council judged that it was ‘premature’ to draw conclusions for
0.5
ability to act’. Overall, we think this commentary is a strong
0.0 2015
signal that the ECB will step up its QE programmes before
2016 June 2015
long. Inflation forecast for 2017 downgraded
0.3 0.1
price stability. However, it emphasised its ‘willingness and
2017
September 2015
Source: ECB
President Draghi followed up the dovish commentary by announcing downgrades to the ECB’s growth and inflation
ECB will likely step up its monthly purchases
forecasts. Importantly this also included the inflation projection
Additional ECB QE is now our base case scenario (we
for 2017, which is currently seen as representing the medium
previously saw a 40% chance). We think that the central bank
term horizon crucial for policy decisions. At 1.7%, the new
will most likely do this by stepping up the pace of its monthly
medium term forecast is already arguably below the ECB’s
purchases. It will also likely need to increase the eligible
price stability goal.
universe of assets it will buy (see our note here for more on this). More QE will likely be announced before the end of this
Increasing downside risks
year.
Furthermore, developments since the inflation forecast was made in ‘oil prices and…exchange rates’, suggest it could be
ECB increases limit for purchases
downgraded further. The Governing Council also saw risks to
The central bank already announced a change in its existing
the economic outlook from ‘current developments’ in emerging
QE programme, that may help it expand it going forward. It
markets, which could affect global growth.
decided to increase the issue share limit from 25% to 33%, which will give it a little more flexibility in its purchases. More
Not quickly reversed
importantly, it opens the door for more changes.
Although, the ECB still felt it was too early to make a clear judgement on all this, Mr. Draghi said several times that it was
Markets rally, the euro declines
unlikely that the ‘recent challenges would be quickly reversed’.
The ECB’s remarks supported both equity and government
This suggests that the central bank feels that the problems in
bond markets. German 10y Bund yields were down by around
emerging markets will not go away in a hurry. As well as
5bp, while the euro Stoxx index was up by almost 3%.
getting a better grip on the recent market turmoil, the ECB’s
Meanwhile, the prospect of more QE also weighed on the
hesitation to act already at this meeting probably also reflected
euro, with EUR/USD declining to around the 1.11 level.
that it needs more time to decide exactly what to do.
2
ECB signals more QE – 3 September 2015
Financial markets Currency markets
Close
Change 1 day % Change 5 days %Change YTD%
EUR/USD USD/JPY
1.1289
0.1597
-0.8432
-6.7025
119.71
-0.0668
0.3016
-0.1085
AUD/USD
0.7031
-0.0711
-0.7762
-13.8885
USD/CHF
0.9617
-0.0935
1.4238
-3.2398
NZD/USD
0.6336
-0.0789
-1.3852
-18.7171
GBP/USD
1.5314
-0.0392
-1.1171
-1.7136
USD/SGD
1.4125
-0.0212
0.3054
6.6360
USD/CAD
Bond markets 2-year German Govt Bond yield
1.3193
Close
0.1290
Change 1 day
-0.9014
Change 5 days 0.0250
13.5859
Change YTD
-0.2130
-0.0100
-0.1150
10-year German Govt Bond yield
0.7970
-0.0010
0.0670
0.2560
Yield curve Germany
1.0100
0.0090
0.0420
0.3710
2-year US Treasury Bond yield
0.7159
-0.0216
0.1154
0.0514
10-year US Treasury Bond yield
2.1807
-0.0372
0.1093
0.0095
Yield curve US
1.4648
-0.0156
-0.0061
-0.0419
US 2-year sw ap rate
0.8494
-0.0012
0.0544
-0.0449
US 10-year sw ap rate
2.2240
0.0031
0.0399
-0.0621
US sw ap curve
1.3746
0.0043
-0.0145
-0.0172
EU 2-year sw ap rate
0.0930
-0.0010
0.0030
-0.0820
EU 10-year sw ap rate
1.1160
0.0000
0.0770
0.3040
EU sw ap curve
1.0230
0.0010
0.0740
0.3860
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
-0.0330
0.0000
0.0000
-0.1110
0.3290
0.0046
-0.0001
0.0734
-8.4000
-55.5300
23.8100
JPMorgan EMBI Plus Sovereign S
411.2500
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
18,166
-3.84
2.02
4.10
Hang Seng Index
21,185
-2.24
-1.03
-10.25
Hang Seng China Enterprises Index
9,454
-2.95
-0.63
-21.12
Australian Stock Exchange S&P/ASX 200 Index
5,096
-2.12
-0.80
-5.81
Singapore Straits Times Index
2,883
-1.32
-0.12
-14.33
Euro Stoxx 50 Index
3,189
-2.47
-0.91
1.34
S&P 500 Index
1,921
-2.57
2.89
-6.67
MSCI World Daily Total Return Gross USD
743
-0.70
3.80
-3.18
AEX Index
434
-2.58
-0.72
2.13
32
12.56
-11.16
66.67
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz Generic first NYMEX Crude Light future Generic first Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
Close
Change 1 day % Change 5 days %Change YTD%
203
2.53
7.69
-12.10
1,141
0.52
0.02
-3.73
46
-6.87
16.56
-13.99
50
-7.20
16.25
-12.35
5,069
-1.29
2.38
-19.54
486
0.05
-1.97
-17.68
3
ECB signals more QE – 3 September 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Monday Monday Monday Monday Monday Monday Monday Monday
31/08/2015 31/08/2015 31/08/2015 31/08/2015 31/08/2015 31/08/2015 31/08/2015 31/08/2015
01:50:00 09:00:00 11:00:00 11:00:00 14:00:00 15:00:00 15:45:00 15:45:00
JP CH EC EC IN BE US EC
Industrial production - % mom Total sight deposits in bn CHF Core inflation - % yoy CPI - % yoy GDP - % yoy GDP - % qoq Chicago Fed - business confidence - index ECB announces weekly QE details
Jul P 21-Aug Aug A Aug P 2Q 2Q F Aug
1.1 463 1.0 0.2 6.1 0.4 54.7
-0.1
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015 01/09/2015
03:00:00 00:00:00 03:45:00 03:45:00 09:30:00 09:55:00 09:55:00 10:00:00 10:30:00 11:00:00 15:45:00 16:00:00
CN CN CN CN NL DE DE EC GB EC US US
PMI manufacturing - index (official) PMI non-manufacturing - index (official) PMI manufacturing - index (Caixin) PMI services - index (Caixin) PMI manufacturing - index Unemployment - % Unemployment change - thousands PMI manufacturing - index PMI manufacturing - index Unemployment - % Markit - Flash PMI ISM manufacturing - index
Aug Aug Aug F Aug Aug Aug Aug Aug F Aug Jul Aug F Aug
50.0 53.9 47.1 53.8 56.0 6.4 9.0 52.4 51.9 11.1 52.9 52.7
Wednesday Wednesday Wednesday Wednesday
02/09/2015 02/09/2015 02/09/2015 02/09/2015
14:15:00 14:30:00
US US BR PL
ADP nat. employment report - thousands Output per hour nonfarm business sector - % qoq Policy rate - % Reference rate - %
Aug 2Q F Sep 2 Sep 2
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015 03/09/2015
07:30:00 09:30:00 10:00:00 10:00:00 10:30:00 11:00:00 13:45:00 13:45:00 14:30:00 16:00:00
FR SE EC EC GB EC EC EC US US
Unemployment (mainland France) - % Policy rate - % PMI services - index Composite PMI output PMI services - index Retail sales - % mom ECB refi rate - % ECB deposit rate - % Trade balance - USD bn ISM non-manufacturing, index
Friday Friday Friday Friday
04/09/2015 04/09/2015 04/09/2015 04/09/2015
08:00:00 14:30:00 14:30:00 14:30:00
DE US US US
Manufacturing orders - % mom Change in employment private employment - thousands Change in employment total - thousands Unemployment - %
0.1 7.0
ABN AMRO
0.1
54.0
49.7 47.2 55.8
52.4 51.9 11.0
52.5 11.0
52.7
53.0
185.4 1.3 14.3 1.5
196.2 2.4 14.3 1.5
195
2Q Sep 3 Aug F Aug F Aug Jul Sep 3 Sep 3 Jul Aug
10.0 -0.4 54.3 54.1 57.4 -0.6 0.05 -0.20 -43.8 60.3
54.3 54.0 57.4 0.6 0.05 -0.20 -44.2 58.5
58.0 0.5 0.05 -0.20
Jul Aug Aug Aug
2.0 210 215 5.3
-0.6 186 203 5.3
-0.4 200 210 5.3
1.5
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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