FX strategy from Credit Agricole
In April, the ECB will cut the pace of its monthly purchases from EUR80bn to EUR60bn.
This, coupled with growing purchases of shortdated bonds, trading below the deposit rate floor, should compound the risks for EUR ahead of the election season in the Eurozone.
A slower pace of asset purchases will coincide with a period of more subdued private demand for EGBs ahead of the Dutch, French and German (and, potentially, Italian) elections. This could lead to further widening in peripheral spreads. In addition, growing purchases of the ‘under-owned’ short-end of the Bund yield curve should push shortterm European rates lower still.
