Independent Strategy

The trillion euro question

ECB President Draghi may have failed to deliver a full-blown QE programme in June. But the market is underestimating the subtleties of what the Governing Council implemented, particularly the new TLTRO programme. If all cylinders fire it could increase the size of the ECB balance sheet by 50%. This compares to a currently shrinking ECB balance sheet. The package should be seen as euro negative and reinforces our expectations for cyclical euro depreciation. We remain short euro versus the US dollar and long Eurozone equities.

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