What do analysts think of the ECB’s move?
The ECB lowered its benchmark rate to 0.25% yesterday and tried to signal the market that rates are going to be lower for longer than many had anticipated. It seems that the message has gone through, though there’s disagreement about whether there will be another LTRO early next year.
HSBC: “The ECB’s surprise decision to lower interest rates will weaken the EUR, and this most likely is exactly what the central bank wants.” This was “the first overt step in massaging the EUR lower. It certainly will not be the last.”
Danske Bank: “We doubt that EUR/USD will be able to stay at the current level the next couple of days and we still see modest downside here in November. Our short-term financial model indicates that 1.33 is the fair level right now. Furthermore, yesterday’s rate cut, the ECB’s view that the inflation will stay low for a prolonged period and Fed tapering being a question of timing underline our long-held view that monetary policy in the US and the euro zone will be on a divergent path in 2014.”