Monex: De geest is uit de fles - Draghi hint op renteverlagingen

Monex: De geest is uit de fles - Draghi hint op renteverlagingen

Interest Rates Central bank ECB
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Hieronder volgt een commentaar in het Engels van Bart Hordijk, valuta-analist bij Monex Europe, op de uitlatingen van ECB-president Mario Draghi dat de de Europese Centrale Bank stimuleringsmaatregelen kan treffen als de economische verwachtingen niet verbeteren.

De geest is uit de fles. Mario Draghi heeft vanochtend gehint op verdere renteverlagingen van de ECB. Zelfs wanneer de Federale Reserve ook de rente verlaagt, kan dit een omgeving creëren waarin meer euro-zwakte verwacht kan worden. Munten met een hoge opbrengst zoals de Turkse lira en de Zuid-Afrikaanse rand kunnen juist profiteren. Daarnaast is het interessant dat Draghi niet van plan lijkt te zijn om zijn ECB-presidentschap te beëindigen zonder een stevige erfenis achter te laten. Door verruimende monetaire maatregelen zo naar de voorgrond te halen wordt het zelfs voor een meer “hawkish” opvolger nog een hels karwei om hieraan te ontsnappen en verkrappende maatregelen op de agenda te krijgen. 
The rate cutting genie is out of the bottle for the European Central Bank after Mario Draghi this morning mentioned that further cuts in the policy rate remain part of ECB’s toolkit. A full ECB rate cut is now priced in by futures markets for 2019 after Draghi showed his concerns about the persistently low inflation in the Eurozone and the lingering risks to growth, especially stemming from weak manufacturing and export conditions. Also, the ECB President mentioned there is “considerable headroom” regarding the Asset Purchase Program, indicating the ECB armoury is far from exhausted.
 
This opens the trapdoor to lower levels on EURUSD, while especially high yielding currencies that are used in carry trades with the euro as main funding currency, like ZAR and TRY, may profit. Even as the Federal Reserve cuts interest rates as well, ECB rate cuts imply that the rate differential will remain in favour of USD denominated assets, keeping EURUSD pinned in a lower range for the foreseeable future. The big winners of this shift ever-more dovish shift in the two most important central banks are likely high yielding emerging market currencies like ZAR and TRY. They profit through the increased attractiveness of carry trades as a strong dovish bias in the Fed and the ECB reduce potential volatility in FX markets, while the spread and thus profits of these trades increase.
 
Although the exchange rate is not an explicit policy objective of the ECB, the collateral damage done to the single currency by speculating on further rate cuts is likely secretly welcomed by the high men of the ECB’s governing council. If the domestic economy fails to produce the inflation needed for the ECB to reach their mandate, there is always imported inflation that can jump to the aid of the Frankfurt-based technocrats.
 
Finally, setting such dovish tones may catch Draghi’s potential successor in a web of easing policies that have just started, or are about to be implemented. Even if the next in line will lean more to the hawkish side, Draghi’s last deeds as ECB president appear to be to solidify the dovish policies to the extent there is no escaping from this. The fact that Draghi is resigning while having his dovish legacy felt may be the main message taken from today’s communications, which implies that even a more hawkish new ECB president will have to take some time to untangle him/herself from Draghi’s dovish web before further tightening can even be put on the agenda again.