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As Pip Diddy briefly mentioned in his London Session Recap yesterday, the Bundesbank announced that it is willing to back the ECB’s inclination to implement further easing next month.

In case you’re scratching your head and wondering what in the world a “Bundesbank” is, then I should tell you that it’s what Germans call their central bank and that it’s meant to be pronounced with the same intensity as “ÜBERMENSCH!”

Another thing you should know about the Bundesbank is that they used to be one of the most hawkish central banks in Europe, earning a reputation for being the biggest rebel to the ECB’s easy monetary policy bias. After all, Germany is the largest and strongest economy in the euro zone, if not the sole country responsible for sustaining overall growth in the region.

This is probably why jaws dropped (and so did the euro) when the Bundesbank shifted to a dovish stance and announced its support for further stimulus from the ECB. In an interview with the Wall Street Journal, a Bundesbank insider revealed that the German central bank is open to supporting aggressive and unprecedented measures necessary to combat low inflation. This includes implementing negative deposit rates or additional LTRO.

With additional prodding from the Bundesbank, ECB Governor Draghi and his men must be feeling the pressure to ease in June! Of course, as Draghi mentioned during the latest ECB rate statement, they would still wait for the latest CPI forecasts to be released before making a decision. Any downgrades or downbeat remarks could convince most euro traders that further easing is in the cards.

Take note though that the Bundesbank hasn’t mentioned anything about the negative impact of euro appreciation yet, as Germany’s export sector is competitive enough to sustain demand even as product prices increase. Heck, Germany’s trade industry could probably survive on sales of luxury car brands like Audi, BMW, Porsche, and Volkswagen alone!

Despite that, the fact that the Bundesbank is starting to worry about low inflation is a significant factor that could tip the scales when it comes to ECB monetary policy. Recall that Bundesbank President Weidmann opposed the ECB rate cut in November last year, as he cited that he’d rather wait for more inflation data. Could his recent shift in stance mean that he has already taken a peek at the soon-to-be-released CPI forecasts?

Among the list of measures that the Bundesbank has expressed willingness to implement are reductions in the ECB’s lending and deposit rates, extensions in unlimited loans offered to commercial banks, new long-term fixed-rate loans for banks, and purchases of asset-backed securities. If that doesn’t yell “Be aggressive! B-E aggressive!” then I don’t know what will!

But before you load up your euro shorts though, remember that the ECB stimulus isn’t a done deal just yet. In other words, it ain’t over ’til Draghi sings! With expectations for easing running high, there’s also a good chance that market watchers might wind up getting disappointed with the actual announcement. Traders have been pricing in weak inflation forecasts or negative deposit rates for quite some time already, which suggests that profit-taking could take place if the ECB decision fails to impress.

How long do you think the euro selloff will last? Share your thoughts in our comment box or cast your votes in our poll below!