Research Team at RBS, is not expecting any changes to interest rate settings or to the size and scope of the asset purchase programme (APP) at this Thursday’s ECB meeting.
Key Quotes
“We are now expecting the ECB to extend the APP from March 2017 to September 2017. We had previously expected this to be announced at the meeting in December. Extending forward guidance on QE to late 2017 will require significant change to the programme.
The issuer limit is arbitrary and should go, as should the maturity limit (31y). But to credibly extend its purchases of Germany, the Netherlands, and Finland, it must (i) choose to relax the issue limits for individual bonds, (ii) buy at yields below the deposit rate, or (iii) abandon the capital key for PSPP quotas entirely. We think that this will prove the order of preference: the issue limits should be relaxed.”
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GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
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Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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