• ECB tone: the European Central Bank council removed the easing bias on the Asset Purchase Programme, but President Draghi was dovish in commenting the change.
  • Economy and risks: confidence in domestic economy is growing with some downward risks (also increasing) coming from the global economy (this time from the West, not the East), explicitly mentioning the need to monitor FX and financial conditions and developments. On protectionism, it is not the direct impact that is worrying, but the “second round effects” of possible retaliations, on the exchange rate and, particularly, on confidence.
  • Market implications: a gradual and well explained phasing out should avoid a rapid repricing in fixed income. Nevertheless, the closer we get to the end of quantitative easing (QE) and to the normalization in ECB depo/refi rates, the higher the probability of a repricing is. Markets usually underestimate the final Central Bank rate level.
  • Investment strategy: at the global level, a new and more volatile phase is opening up, due to different speeds in Central Banks’ recalibration policies. To deal with this new phase, investors should adopt diversified strategies: Not only duration (short) and credit (long but with a more cautious approach), but also currencies (USD, EUR and tactically EM FX). This will be, in our view, an important source of performance in this complex phase.