I posted a few ECB July monetary policy meeting previews earlier:

This now via Goldman Sachs, firstly on recent comments (last week) from President Draghi & also Constancio, then on their outlook for the meeting result:

Mr. Draghi expressed "confidence" that ECB policy is working and that the economy is recovering. He noted that the threat of deflation was gone. (This has previously been noted by Mr. Draghi at both the ECB March meeting and the June meeting.)

  • noted that the economic recovery is leading to reflationary pressures, but that "temporary" shocks still weigh on inflation. These shocks, however, should not "cause inflation to deviate from its trend over the medium term so long as monetary policy continues to maintain the solid anchoring of inflation expectations".
  • Went on to say that as this recovery continues, "a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments - not in order to tighten the policy stance, but to keep it broadly unchanged".
  • Also went on to stress the need for "persistence" in monetary policy.

Says that "inflation dynamics are not yet durable and self-sustaining" and therefore that "a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up".

  • Says volatility in financial markets can cause "unwarranted tightening of financial conditions" and for this reason there "are strong grounds for prudence in the adjustment of monetary policy parameters".
  • in this context that "any adjustments to our stance have to be made gradually, and only when the improving dynamics that justify them appear sufficiently secure".

This speech was followed by comments from Mr. Constâncio:

  • Said that inflation was not responding in the normal way given "our common estimates of Euro area slack" and that other measures of slack may be better suited for explaining inflation dynamics.
  • Went on to say that the Euro area equivalent of U6 unemployment stands at 18% compared with 9% in the US and that this justifies "persistence" of the monetary policy stance.

A leaked Reuters story was published saying that financial markets failed to take note of the caveats in Mr. Draghi's speech

  • Draghi's comments were intended to prepare the market for a decision on stimulus later this year without making a firm commitment.
  • Further noted that Mr. Draghi's comments suggest that the ECB will be patient in the event that inflation takes longer to reach the target

GS go on (bolding is mine):

  • The relatively sizeable market moves raises the question whether the ECB will view this as an 'unwarranted' tightening of financial conditions that requires a policy response.
  • We do not think that the ECB will be too concerned about recent price action in longer-dated Bund yields. Yields have been depressed and remain within its range observed so far this year.
  • Higher yields may reflect an expectation of higher future growth.
  • We see the ECB as having greater concern for an appreciating EUR vis-a-vis the USD, especially in the context of a market which is increasingly doubting the Fed's scope to raise rates further.
  • The EUR/USD has reached its highest level so far this year.
  • Given our interpretation of Mr. Draghi's speech and other comments at the Sintra conference, we leave our forecast of ECB policy unchanged. This includes that we expect no change in policy rates or asset purchases for the reminder of 2017.
  • We expect the ECB to taper its asset purchases gradually during 2018 (with an announcement of this some time in the Autumn). We do not expect a rate hike until 2019 (even if risks are skewed to an earlier hike should economic growth and inflation surprise positively relative to our expectations).

So, you're buying EUR/USD, eh?