Roughly two weeks ago Bloomberg ran a story citing ECB sources suggesting staff at the central bank had presented the Governing Council with plans for a EUR500bn government bond buying programme, debating whether to manage this through monthly targets like the Fed did through its three QE programmes or a total amount like the BoE. While the story went hand in hand with numerous ECB officials’ public comments that the ECB was ‘preparing the ground’ for additional easing that could include QE, we said at the time that this looked like a flag-waving exercise to test market reaction ahead of any decision on 22nd January. The reaction wasn’t positive, with the EUR rallying slightly over the following days, suggesting FX markets at least were looking for more than this.
Read the full report: FX Research