The European Central Bank will hold its press conference on Thursday June 4th
Please find below what we expect:
- We expect no change in the deposit rate.
- We expect the size of the PEPP to increase from € 750bn to €1000-1250bn. This decision is the most important as markets may interpret it as a confirmation of the central bank’s independence. The size of the PEPP is important but communication will be decisive.
- We expect to have some details about reinvestments coming from the PEPP. One could say that the PEPP is not a long-term instrument (contrary to typical QE) and that purchases should not be reinvested forever, but we do not think it is the ECB’s intention to send such a “hawkish” message considering current uncertainties.
- We expect the ECB to include fallen angels in the PEPP; it is a close call.
- We do not expect TLTRO terms to be changed; the tiering multiplier will remain as is.
- We expect macro-economic projections to be revised downwards, as already indicated by Mrs. Lagarde last week.
Following speeches from Mr. Villeroy and Mrs. Lagarde, market expectations have dramatically risen over the last 10 days, so it might be a “buy the rumors, sell the facts” central bank event but positioning still appears to be on the low side so we would lean towards a moderately bullish response from markets.
Disclaimer
This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.