In the minutes from July’s ECB policy meeting, there were concerns over possible market over-shooting, especially in the currency markets.
There were also comments that favourable financing conditions could not be taken for granted and relied to a great extent on policy.
Comments were also made that it was paramount to avid signals that might prove premature or prone to over-interpretation.
The minutes stated that inflation had been slightly lower than expected due to the impact of oil and exchange rates.
There were, however, also comments that the more favourable growth outlook increased confidence that inflation will gradually converge to target. Core inflation had shown tentative signs of a pick-up, but there still needed to be conclusive evidence of an upward trend.
Evidence of divisions was a significant feature with one member remarking that the recovery was becoming more self-sustaining and that consideration should be given to an adjustment of the language.
The rhetoric overall continues to suggest that the ECB will be very cautious in removing policy accommodation despite greater optimism surrounding the growth outlook.
The Euro dipped lower following the minutes with increased speculation that there would be verbal intervention to weaken the Euro or that any policy tightening would be delayed if the currency continued to advance.
EUR/USD declined to 3-week lows below 1.1670 before finding support. Bunds rallied, although they remained in negative territory by around 10 ticks on the day.