ECB Officials Said To Assume QE Ends With Short Taper, Euro Slides

While hardly news to those who followed Mario Draghi’s dovish press conference last week, moments ago “ECB officials” were once again on the tape trying to talk down the Euro, after a Bloomberg report that “ECB Officials Are Said to Keep Assumption QE Ends in Short Taper.”

According to Bloomberg, central bank policy makers are sticking to the assumption that their bond-buying program will be wound down over about three months rather than brought to a sudden halt.

Even the more-hawkish members of the Governing Council, who are pushing for policy language that would signal the end of crisis-era stimulus measures, endorse a gradual slowing of asset purchases after the latest extension concludes in September, the officials said, citing informal discussions. They asked not to be identified as the deliberations are confidential, and noted that no decision has been taken.

As Bloomberg adds, “Eight months before the end of the current phase, the latest views suggest a consensus is hardening on the appropriate strategy for concluding the program in an orderly way without roiling markets.”

As a reminder, QE is currently scheduled to conclude in September 2018, which means a 3 month unwind is that QE will end in December 2018. This is in line with market expectations. Of course, the Governing Council reiterated after last week’s policy decision that “the program could be extended again if the inflation outlook is too weak.”

In other words, the ECB is trying to double down on its dovish undertones from last week which were drowned by Mnuchin’s dollar-negative sentiment, and are taking advantage of today’s USD strength to boost the Euro downside.

And so far it is working as the chart below shows.

As for the kneejerk move lower in German yields, it appears to have already been undone as the market realizes this is nothing new to what the ECB already said.

 

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