Europe – a parting gift

The ECB’s latest stimulus package seeks to address several problems and does so quite neatly. Banks win, thanks to tiering and more generous TLTRO terms while more bond purchases will also contribute to the bottom line. Draghi has also strengthened forward guidance. Not only have timeframes been jettisoned but the ECB has explicitly linked the mandated inflation objective and underlying (core) inflation. That is a dovish step, even if it brings its own potential complications given how static core inflation has been. All of these measures should contribute to a weaker euro over both the short and medium-term. We maintain our $1.04 per euro target for the end of this year.

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