ECB: QE extension to be announce in October - Danske Bank

According to analysts from Danske Bank, the ECB will announce a reduction in QE purchases at the next meeting. They see EUR/USD dips as short-lived. 

Key Quotes: 

“Draghi confirmed the bulk of QE decisions is likely in October – the 33% limits will not be lifted, hence capital key deviations continue.”

“The inflation outlook was revised lower reflecting the stronger euro – a substantial degree of monetary accommodation is still needed.”

“The underlying euro momentum remains strong and any dips in EUR/USD should be shallow and short-lived. Focus on the euro and the smaller concern about an abrupt end to QE resulted in a strong performance for the periphery bond markets.”

“We still believe the ECB will announce a reduction in its QE purchases to EUR40bn per month in H1 18 at the next meeting in October. The programme should be continued without lifting the 33% limits, but instead be based on continued capital key deviations. We also consider it likely that the ECB will buy a higher share of corporate bonds. These purchases will have a more direct economic impact and the ECB’s holdings are not close to the 70% ISIN limit.”