巴黎银行-欧洲-宏观策略-欧洲央行：准备好并下定决心-20190410-8页.pdf

|FOCUS 10/04/2019 1 FOCUS|EUROZONE 10 April 2019 ECB:Ready and determined KEY MESSAGES The macro assessment was little changed,but most of Draghis remarks had a distinctively dovish flavour to them.The ECB president reaffirmed a bias to ease monetary conditions while highlighting the central banks readiness to act if needed and its determination to pursue its(symmetric)price stability objective.We expect a relatively generous TLTRO III.Tiering now looks more likely than not and could be pre-announced as early as June,even though for implementation we still think we need to wait for later in the year.Macro assessment:not much change The macro assessment was little changed from the message delivered at“The ECB and its Watchers Conference”.The economic slowdown has proved deeper and more prolonged than the central bank had anticipated and risks were still described as to the downside.On the other hand,fundamentals remain supportive while a number of one-off factors that had weighed on the economy may now have started to fade,according to the ECB.Mario Draghi restated his assessment that the probability of a recession is low.We continue to believe this assessment is overly-optimistic.While data are set to rebound in the near term,growth is likely to settle at below-trend pace in H2 2019,we believe,which should lead the central bank to revise down yet again its growth projections.Please refer to MAR disclosures and important information at the end of this report FX:The EUR is lower following the ECB meeting,with EURUSD retracing slightly more than 50%of its gains from earlier in the week.In our trade ideas portfolio,we continue to hold a EURJPY short position(120 digital,1-Aug-19 expiry).We also note that current implied volatility pricing allows investors to position for an upside breakout in EURUSD,and hedge against the risk of a downside collapse,while funding via short USDCAD strangles.We do not think this is justified and,as a result,hold a EURUSD 1.10/1.18 strangle funded by a 1.2969/1.3796 strangle(6m expiry,initiated on 28 March 2019).Rates:ECB President Draghi may have presented a dovish message,but the absence of any concrete policy response from the ECB led to a repeat of the increasingly familiar“disappointment trade”in euro area rates markets:the yield curve bull flattened,Bund yields edged back into negative territory and breakeven inflation forwards further extended the time until inflation is expected finally to return to the ECBs target(now 16 years away).With the economy weak and the ECB inert,we favour positions that benefit from positive carry and low volatility.Supported by record redemptions and coupons payments,we would expect OATs to remain the best performers in the coming weeks.We keep our long 10y OAT vs Bund,swap and olos.In inflation we expect 5y5y/15y15y to flatten and we expect 10y Bunds to underperform the barbell of 5-and 30-years.MARKET VIEWS|FOCUS 1 1 KEY MESSAGES At todays press conference,Mario Draghi highlighted theECBsreadinesstoactifneededandits determination to pursue its(symmetric!)price stability objective.This was a welcome development,in our view,following the timid message delivered in March.The ECBs staff projections are overly optimistic and set to be revised down further,we believe.With this in mind,we think Mario Draghis more aggressive rhetoric will have to be followed by action.We expect a relatively generous TLTRO III.Tiering now looks more likely than not and could be pre-announced as early as June.For implementation,though,we still think we need to wait for later in the year.MARKET ECONOMICS|G10FX|G10 INTEREST RATES Luigi Speranza,Chief Global Economist|BNP Paribas London Branch Spyros Andreopoulos,Senior European Economist|BNP Paribas SA Zweigniederlassung Frankfurt Sam Lynton-Brown,Head of G10 FX Strategy,Europe|BNP Paribas London Branch Eric Oynoyan,G10 Rates Strategist,Europe|BNP Paribas London Branch Marco Meijer,G10 Rates Strategist,Europe|BNP Paribas London Branch|FOCUS 10/04/2019 2 Still,Mario Draghi went further than we had expected in a number of ways:Contrary to what was hinted at the March meeting,the criteria to be used to define the details of the next TLTRO suggest the instrument is not meant only to relieve potential funding pressure,but rather as a response to a deteriorating macro outlook,ie,an instrument to ease the stance of monetary policy(via credit easing).In this regard,we expect the details to be announced will be closer to the TLTRO II than what was initially suggested by the ECB.The objective of the mitigating instrument(e.g.tiering)is to facilitate the transmission mechanism of monetary policy.This is less immune from criticism than the intention to support banks profits and will limit potential objections to a tiering system.Asked whether tiering would open the option of rate cuts,Draghi mentioned the issue was not discussed but did not rule it out.We remain of the view that the aim is to leave interest rates unchanged for a prolonged period,but that its introduction would leave the ECB the option to respond to potentially adverse shocks such as a strengthening of the currency by reducing the depo rate further into negative territory.The threshold for a generous TLTRO III and/or tiering appears to be lower than previously suggested.Lack of a significant improvement in the macro outlook will suffice for the ECB to proceed in both directions,in our view.While forward guidance was formally left unchanged,implicitly the discussion on tiering has a powerful signalling effect and confirms the ECBs bias to leave rates unchanged potentially for a prolonged period.Conclusions In March,we expressed disappointment at the press conference,as we found that the action put in place was too timid given the sizeable downward revisions to the staff growth projections.Today,the ECB expressed a greater determination and a stronger sense of urgency to achieve its mandate a welcome development,in our view.Still,if growth fails to soon return to trend,as we suspect,this more aggressive rhetoric will have to translate into action for the markets to reconsider their sober assessment on the inflation outlook.We continue to expect a relatively generous TLTRO.The introduction of some forms of tiering to mitigate the adverse effects on banks of negative rates now looks more likely than not.Its timing is more uncertain,though.Depending on the data evolution,the ECB could pre-announce a decision in this direction as early as June.However,we still think that a formal announcement will only arrive at a later date,with implementation unlikely before October when the transition from Eonia to STR is completed.Stronger rhetoric Beyond the macro assessment,Mario Draghi delivered four key messages,all with a dovish flavour.i.The ECB is ready to act with all of its instruments,if needed.The focus here was on all,which we read as including rate cuts should conditions require it.The emphasis on this point reveals a decisiveness that we believe was missing at the March meeting and is a welcome development.ii.The markets clearly understood the message from the“ECB and its Watchers conference”.On that occasion,the ECB president emphasised the risks to the ECBs central case and opened the way to tiering.Todays press conference reinforced the,dovish message delivered by Mario Draghi at the end of March.iii.The ECB does not tolerate low inflation and is committed to achieve its mandate“without undue delay”.This resembles comments made in 2015/16 and reveals a sense of urgency,which again was absent in March.This urgency is justified,we think,by the fact that since then the ECB has not been able to achieve its inflation aim.Three years down the line,this lowers the bar to further action,in our view.In this context the President mentioned the June ECB staff projections as an important input,suggesting that June is“decision time”.iv.The ECBs inflation objective is symmetric and allows for deviations on both sides.This reminds us of Feds Powell recent comments and is a significant step to dispel the perception that“below,but close to,2%”inflation is a ceiling.It shows ambition and like the comments on urgency is meant to rebuff the markets impression that the ECB is resigned to missing its target for a prolonged period.The juicy part:TLTRO and tiering Despite this more aggressive rhetoric,and,as expected,there was no action at this meeting:the ECB will announce the details of the TLTRO III at“one of the forthcoming meetings”and will consider whether to mitigate the possible side effects of negative rates on banks.Of note here is that the ECB president did not explicitly mention tiering and instead kept conspicuously vague on the exact mitigating methods the ECB is contemplating.Both decisions will depend on two criteria,namely (i)the evolution of upcoming data;and(ii)the transmission mechanism of monetary policy.Among other factors,this lack of action probably reflects persistent divisions within the Governing Council on both the economic outlook and the best course of action for monetary policy.Upcoming data will likely be decisive in tilting the balance in one direction or another.ECB:Ready and determined Luigi Speranza,Chief Global Economist|BNP Paribas London Branch,Spyros Andreopoulos,Senior European Economist|BNP Paribas SA Zweigniederlassung Frankfurt,Sam Lynton-Brown,Head of G10 FX Strategy,Europe|BNP Paribas London Branch,Eric Oynoyan,G10 Rates Strategist,Europe|BNP Paribas London Branch,Marco Meijer,G10 Rates Strategist,Europe|BNP Paribas London Branch MARKET ECONOMICS|G10FX|G10 INTEREST RATES Legal Notice This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies(collectively“BNPP”);it does not purport to be an exhaustive analysis,and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report.This document is non-independent research 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