ECB minutes reveal similar concerns as the Fed, further steps in September – MUFG

The minutes from the ECB meeting on 15-16 July were released on Thursday and just like the Fed the previous day, there was a clear sense of concern over the near-term outlook for the economy, economists at MUFG Bank brief. EUR/USD trades around 1.1840, having defended 1.18 on Thursday.

Key quotes

“The ECB agreed there was ‘no room for complacency’ and there was also an important reference to the ECB’s scope to do more going forward. But really with this meeting coming ahead of the meeting when we will get an update to the staff’s projections, the message was clear – we can wait until the September meeting before being in a position to offer any stronger guidance on the monetary policy outlook. But certainly, if that meeting had taken place today we would imagine there would have been a stronger sense of concern expressed.” “The forecasts now being compiled by the ECB will undoubtedly reflect the reality that wasn’t as clear in mid-July, COVID cases are picking up again and that is translating into high-frequency data that indicates the recovery is flat-lining.  

The market will certainly be expecting an ECB message in September

  “So while the ECB minutes revealed a sense of concern like with the Fed, the concerns will be even more elevated now. We won’t, of course, get any monetary easing in September but if the COVID situation continues to worsen in Europe and the high-frequency data worsens further, the market will certainly be expecting an ECB message in September of the ECB seriously looking at additional steps to shore up a unexpected economic deterioration again. This doesn’t appear to us to be macro backdrop for EUR/USD to advance and as we have been stating recently, the risks are skewed to the downside for now.” ECB minutes reveal similar concerns as the Fed, further steps in September – MUFG