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Goldman Sachs note that "the ECB kept policy...>

STIR
STIR: Goldman Sachs note that "the ECB kept policy on hold, with President
Lagarde emphasizing her expectations to deliver PEPP in full. Lagarde also
confirmed that the recent reduction in the pace of purchases is intentional,
reflecting an improvement in market conditions. Notably, there was no discussion
of a change to the tiering mechanism. This suggests little urgency to shift the
tiering multiplier, a slightly bullish signal for the EUR front-end on its own.
With ongoing strength in EURUSD expected to continue, it is possible that the
ECB faces increasing disinflationary currency appreciation pressure, pointing to
a higher likelihood of rate cuts to contain currency strength. Since the ECB now
has dry powder on a tiering multiple change, this could be kept in reserve to
cushion the impact of a rate cut scenario. As a result, front-end receivers such
as 6m6m EONIA have increasingly good risk/reward."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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