Goldman Sachs expects more ECB QE but says it may not push down yields

Goldman Sachs says more ECB QE may not push down yields

Analysts at Goldman Sachs took a closer look at the Eurozone today. The market is buzzing with talk about more ECB action as concerns about global growth mount.

They highlight the tailwinds from the easing of financial conditions over the past three years.

"Despite the modest tightening of [financial conditions] in recent months, financial easing will continue to support the Euro area recovery through end­ 2015 and into 2016."

It will be especially supporting for Italy and Spain but they warn that will peter out in the by mid 2016.

As it does, they believe the euro will decline and the ECB will launch into more QE rather than cutting rates.

"Contrary to what the market is pricing, we do not think an enhancement of the QE programme would necessarily imply long-dated bond yields falling further and the EUR curvey continuing to flatten.

They also reminded clients that one of their top recommended trades for 2015 was a 1-year put spread opened when EUR/USD was at 1.2530 in order to but on the downside.