A quick look into the ECB Press Conference which took place on Thursday the 9th of September, 2021.
- ECB’s Pandemic Emergency Purchasing Programme (PEPP) is likely between €60-70 billion per month
- Lagarde says this is not tapering
- Inflation upgraded, still below mid-term target
- High vaccine rates bolster eurozone recovery
As expected, the ECB stood pat on rates and held the size of its PEPP envelope at €1.85T. The key adjustment to the policy statement was that purchases under PEPP were to be conducted at a “moderately lower” pace compared to Q2 and Q3; some commentators have suggested this would equate to around €60-70B p/m vs current circa €80B.
At the follow-up press conference, President Lagarde noted that the Euro area economic rebound is in an increasingly advanced stage, and output is set to exceed pre-pandemic levels by the end of this year.
Subsequently, for the accompanying economic projections, the central bank’s 2021 growth forecast was upgraded from 4.6% to 5.0%, with the base-effect spill over resulting in a minor tweak lower to the 2022 growth view, from 4.7% to 4.6%, while 2023 growth view was left unchanged at 2.1%.
The ECB still characterises inflationary pressures as transitory, however, its 2021 inflation projection was lifted from 1.9% to 2.2%, 2022 CPI forecast was raised from 1.5% to 1.7%; 2023 was revised up a touch from 1.4% to 1.5%, and thus it still sees inflation below target at the end of its forecast horizon.
Lagarde went on to state that the decision to slow purchases, and the wording in the statement, was unanimously agreed. For those looking for clues on “life after PEPP”, the President remarked that discussion will take place at the December meeting.
That said, Lagarde reassured markets that when PEPP “was done,” the job of the ECB would still not be complete, as the Governing council attempts to reach its inflation mandate.
Overall, Thursday’s release failed to deviate much from market expectations, with the ECB slowing purchases in Q4 and refraining from giving much in the way of clues as to how PEPP will most likely transition into a beefed-up annual payment plan.
I’ve been sharing my thoughts on E/U over the past couple of weeks, and have been pointing out the bearish order block underneath 1.19, which we did indeed see price reverse from a couple days ago.
Currently, we’re seeing price hold just underneath this medium-term descending channel where we’re now waiting on further confirmations as to where price could be heading next.
If price continues to stay below the channel’s top, and slowly push lower, it’s likely we could see the trend continue and price head towards the channel’s bottom. If we do see yet another break higher, the order block will become a breaker block, and essentially an area to go long from.