EURUSD Down, Equity Down On ECB Delivering Deeply Negative Interest Rates

EURUSD Down, Equity Down On ECB Delivering Deeply Negative Interest Rates by Fasanara Capital

ECB likely to act forcefully on March 10th

European inflation forwards (see chart below) are today well below the levels at which the ECB felt compelled to launch QE1 on 22nd January 2015. EUR trade-weighted index is also stronger today than it was back then. Moreover, economic activity indicators are softening, credit formation remains weak, the global outlook for international trade and geopolitical risks deteriorates. We believe the ECB may deliver as follows:

• Depo rate cut to -0.5% from -0.30% (two-tiered system to avoid hitting on banks too visibly, similarly to what Japan did last month). The ground prepared for further cuts to -1%/-1.5%.
• QE monthly purchases...
  

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