RBS among many banks pulling forward easing calls

Want to be a bank economist? All you need to do is listen to Draghi.

Draghi: "We're going to ease in March."

Bank economist: "Draghi is going to ease in March."

"An easing bias to the ECB's monetary policy is accordingly now very firmly in place. The ECB will naturally keep a close eye on the incoming economic data in the period ahead in deciding whether or not to act again in March.

We suspect that the data for both growth and inflation will undershoot consensus expectations in the coming weeks. And at the very least the numbers will force a downward revision to the ECB's growth forecast and a larger downward revision to the inflation forecast. On the latter we are forecasting that headline CPI inflation will average -0.1% in 2016 with an assumption that oil prices would remain close to current levels. The ECB had anticipated that inflation would average 1% in 2016 with an embedded oil price assumption of around $52/barrel," RBS projects.

"We expect further easing in March to encompass another 10 to 15bps cut in the deposit rate and a further EUR 10-15 billion on the QE purchase programme. The risks to that mix of anticipated policy measures are tilted toward a bigger rate cut and a slightly lower level for QE," RBS adds

Here is BTMU:

The euro continues to remain stable against the US dollar in the near-term, but the more dovish than expected comments from ECB President Draghi after today's policy meeting are likely to weigh on the euro in the week ahead, says The Bank of Tokyo Mitsubishi UFJ (BTMU).

"President Draghi clearly highlighted that downside risks have increased to the ECB's inflation outlook. A clear signal was also provided that the ECB will weigh up the need for additional stimulus at their next meeting in March when the staff forecasts will be updated.

Another key determinant of euro direction in the week ahead will be global investor risk sentiment. If global investor risk sentiment remains fragile next week it should provide support for the euro and justify our neutral bias for EUR/USD. However, if global equities begin to stabilize or rebound it would increase downside risks for EUR/USD in the near-term.

We are also wary that the Fed will release a more dovish statement after their meeting next week which could weigh modestly on the US dollar, although the Fed is unlikely to be overly concerned by recent developments at this stage," BTMU argues.

BTMU is neutral on EUR/USD around current levels seeing the pair trading in a 1.06-1.1050 range in the near-term.

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