The ECB has again surprised the markets by announcing an open-ended QE programme of monthly purchases of EUR60bn.
Very importantly, the ECB will continue asset purchases until it sees an improvement in the outlook for inflation.
QE supports our above-consensus view on euro growth and benefits inflation expectations, hence it will limit second-round effects from the oil price decline.
The programme will bring the ECB balance sheet above EUR3trn in mid-2016 and boost excess liquidity in the Eurosystem - but not before the summer.
We estimate the ECB will purchase around 50% of 2015 gross supply of government bonds. Government bond purchases will constitute EUR925bn until September 2016.
Fixed income markets responded with a massive curve flattening as purchases up to 30Y maturity was the biggest surprise - periphery outperformed core.
EUR-crosses to fall further near-term with EUR/USD leading the way. In our FX Trading Portfolio, we are short EUR/USD with a target of 1.09.
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