The ECB left everything on hold as expected. There was a change to the statement around recalibrating PEPP that ruffled some feathers but really was nothing to note – Lagarde and co have been saying this since the last meeting and only affords the ECB the kind of optionality we fully expect it to maintain. 

The statement featured the following not present before: “If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.” 

So PEPP could be smaller or larger, it all depends on financing conditions. Could go up. Could go down. This is not a new thing but a reiteration of what Governing Council members have been saying since the last meeting. You could argue it’s a slight sop to the hawks as it means they could reduce the PEPP envelope – or not use if fully – but really this is not a material change and should not be a big surprise to the market. As ever, though, small hints from central banks can be latched on by particular market participants as a sign of something bigger to come.

Otherwise it’s as you were in terms of rates and PEPP and APP size, duration and reinvestments; and this should hopefully be a non-event with the Lagarde presser coming up. 

The euro likes it: EURUSD shot up to 1.2160 to a week high.