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EUR and ECB: Dovish for bonds, but not for EUR
The European Central Bank surprised with the announcement of frontloaded Pandemic Emergency Purchase Programme (PEPP) purchases (see ECB Review), but in terms of the dovish impact on underling eurozone assets, this is more a story for the eurozone bond market than the euro itself. As we argued in the ECB Cribsheet, as long as the whole PEPP envelope is not extended, the negative impact on the euro should be limited as this only changes the pace of the bond purchases, but not the overall size. For a more meaningful (negative) impact on the euro, the size of the PEPP envelope should have to be increased. Such a ... (full story)