FXStreet (Edinburgh) – Strategists at TD Securities remarked the relevance of the Greek developments in next week’s ECB meeting.
Key Quotes
“The ECB view for the next week is very Greek dependent”.
“If the Eurogroup and leaders decide there is no basis for further negotiations with Greece, we would assume the ELA to Greek banks would be terminated on Monday”.
“This will require the Greek government to nationalize the banks and begin the de facto Grexit process”.
“While we have not seen significant, sustained market contagion over the last two weeks, we would expect the ECB to announce some USD and EUR liquidity tenders, if only to provide a signal that they remain ready to act further”.
“This would also require, however, they release more details as to how the unwind of the ELA and TARGET2 may have to proceed”.
“It would then be doubtful that the ECB would announce any changes to QE over the weekend, and we think still unlikely they would do so on Thursday”.
“The Governing Council is more likely to make any needed changes to the pace and total of QE at the September meeting when they have new forecasts supporting their medium-term”.
“If peripheral spreads widen by more than 50bps and hold that through the week, however, it is likely to be a close decision on whether to front-load more QE, as the ECB still seems inclined to avoid further rate cuts”.
(Market News Provided by FXstreet)