Markets probably would shrug off QE by the ECB
Many investors are bulled up on government bonds as well as "risk" assets in
the hope that the European Central Bank will announce a quantitative easing
program on September 4. Even if it does initiate QE, then or at some point, the
initial market moves may confound investors. QE probably works better as a
threat than it would in reality. We think it is priced in to a high degree and
the ECB may find it difficult to reduce further core yields or peripheral
spreads.
A fresh look at QE post euro area inflation numbers
We continue to believe that the arguments in favour of a wait-and-see strategy
will keep the ECB from acting on Thursday. We find it likely that Mr Draghi
will use a slightly more hawkish tone at the press conference than in his
recent Jackson Hole speech.
see full note attached