Main scheduled event of the week: ECB rate meeting

Author: Giles Coghlan | Category: News

ECB rate meeting in focus

A the July meeting the ECB laid out the potential for a rate cut by changing its forward guidance on rates to include an 'or lower option'. See below: 

ECB rate meeting in focus

Market expectations are for the ECB to cut rates by 10bp and the ECB to announce some form of deposit tiering system, given it is explicitly mentioned as a mitigating measure, and restarting QE. Here is a skeleton outline of what to look for

  1. If the ECB cut rates by 10bps and restart QE, expect the EUR to potential rally on a 'sell the rumour, buy the fact trade'. (watch the statement doesn't flag up further rates cuts to come in the future though as that would alter this outlook).
  2. If the ECB don't cut rates or introduce QE, expect immediate EUR buyers on a relief rally
  3. If the ECB cut rates by 20bps plus and restart QE for more than 60bln per month expect immediate EUR sellers.

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