Nordea Bank says markets are more vulnerable to a slightly hawkish ECB

"We do not expect any changes to the ECB monetary policy when the Governing Council meets on 9 March. Although the headline inflation was already at the target in February at 2.0%, the continuously slow core inflation (0.9% in February) and moderate inflation projections for the coming years support the ECB's current loose monetary policy stance.

We assume any discussion on exiting from the current asset purchase programme to be postponed and Draghi to repeat that tapering was not discussed at the meeting. We continue to expect the next reduction of asset purchase programme to be announced in the autumn of this year and to come into effect in January 2018. However, the recently seen favourable economic development probably starts shifting the discussion towards slightly more hawkish comments in the coming meetings.

...In an environment where longer bond yields are trading towards the lower end of their recent trading range, headline inflation has reached the ECB's target and the first ECB tapering step is around the corner, we find markets remain more vulnerable to a slightly hawkish than a dovish message. Hawkish words thus have potential to lift long yields and boost the EUR compared to the size of the opposite moves in case the ECB retained a dovish tone".

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