We’ve just had the ECB Presso and it certainly caused a bit of a move in the currency markets (my EURGBP trade took a bit of a hit, but I’m still in).
The argument seemed to be that this is a recalibration of stimulus (similar to the language when they sped up PEPP earlier on).
They’ve updated their projections for growth too and this is when the currency really started to move lower.
The takeaway really is that Medium-Term Inflation is still seen well below target. And this is the reason why the ECB will continue to be on the dovish side.
In terms of my long EURGBP trade, I’m still pretty optimistic as ultimately, regardless of how much Mrs Thatcher President Lagarde decides to quote, this is a tapering of purchases. Given we are going to see more government supply also coming online through the winter months, bond yields in the Eurozone could actually increase slightly more over the coming months.
All-in-all, this is a reason for me to become a little more constructive on the EUR.
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