RBC's Cole: Negative Risk for Euro on ECB's Next Move

The transcript discusses the European Central Bank's (ECB) inflation forecast, which has been undershooting expectations. It explores potential policy changes under Mario Draghi, including modifications to quantitative easing (QE) parameters rather than further interest rate cuts. The discussion also covers the potential negative impact on the euro and how Federal Reserve (Fed) rate hikes could ease ECB's policy stance through exchange rate effects. The market's pricing of Fed hikes is also examined, with a focus on how these factors interplay in the broader economic context.

What is the ECB considering to address inflation undershooting its forecast?

• Increasing interest rates

• Modifying QE parameters

• Reducing government spending

• Implementing tax cuts

What is the ECB's stance on further easing of policy?

• The ECB is considering modifying QE parameters

• The ECB is reducing QE parameters

• The ECB is planning to increase interest rates

• The ECB is not considering any changes

What is the potential risk for the euro in the short term according to the transcript?

• Positive risk due to strong economic growth

• Risk of inflation overshooting

• No risk as the euro is stable

• Negative risk due to ECB's policy adjustments

How might a Fed rate hike affect the ECB's policy stance?

• It would make ECB's policy more restrictive

• It would have no impact on ECB's policy

• It would ease ECB's policy stance through exchange rate effects

• It would force ECB to increase interest rates

What is the market's current expectation regarding the Fed's rate hike?

• The market is uncertain about the rate hike

• The market expects a rate cut

• The market has largely priced in a rate hike

• The market expects no rate hike