What will the ECB deliver in June?

Draghi has committed the ECB to action in June when the governing council will have the crutch of the latest staff economic projections to justify a change in policy. We know there is unanimity at the bank on the need to avoid a period of prolonged low inflation and that the current level of the euro is a problem that must be addressed. There is also consensus on the use of unconventional measures to address both issues. Tinkering with policy rates, LTROs or ending SMP sterilisation isn’t going to cut it. What is needed is a persistently weaker euro. To get that the ECB needs to either embark on a comprehensive QE programme or, more radically, intervene to weaken the currency below 1.30. We stay short euro versus the US dollar.

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