MUFG Research discusses its reaction to the ECB's strategy review.
"President Lagarde confirmed yesterday that the new strategy does not have implications on pushing back the timing of when monetary tightening may come. This begs the question – what was the point in all of this? If the new strategy does not change the ‘reaction function’ of the ECB well then why should the markets attach any greater level of credibility on the ECB achieving the inflation target (that is now a touch higher) than before?," MUFG notes.
"In theory the ECB should be doing something different at the next meeting when this new framework will be live – on 22nd July. But it won’t and therefore we see little impact for now from this review announcement. There may have been some modest speculative selling on the prospect of a more meaningful policy review providing a more dovish tilt to monetary policy and hence at the margin (we doubt there was much EUR selling on this) this may be EUR supportive," MUFG adds.