ECB: Expect a more aggressive easing package – TDS

Research Team at TDS, suggests that the ECB meets, and they expect a more aggressive easing package than what is currently priced into markets.

Key Quotes

“However, the composition is likely to be more complicated than usual, given the array of policy options and technical adjustments that are possible. Ultimately, we expect a 20bps depo rate cut, a €10-15bn increase in QE for at least six months (they have the space), and further measures to ease liquidity in markets.

We admit large uncertainty on whether they deliver -20bps vs mkt -10bp. This should be less consequential for EUR though as less now increases the likelihood that they leave forward guidance for more and/or drop the deposit rate floor – leaving the EUR reaction largely the same.

In the press conference, we would take more of a cue from forward guidance and that is where EUR’s real upside risks materialize. If they suggest no urgency or even chance for more rate cuts, Euribor repricing will force EUR to squeeze higher. And if there is no additional liquidity in some LTRO-form, equities and credit could react poorly, squeezing EUR higher in spite of easing.”

Research Team at TDS, suggests that the ECB meets, and they expect a more aggressive easing package than what is currently priced into markets.

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