The European Central Bank (ECB) will start a final round of monetary easing on Thursday with a 20bp rate cut of the deposit rate, a small tiering system, a repricing of the Targeted Longer-Term Refinancing Operations (TLTROs) and a restart of Quantitive Easing (QE) with some €30 billion per month, according to analysts at ING.
Note that markets are fully priced for a 10 basis point deposit rate cut. For instance, the yield on the two-year German bond yield closed at -0.84% on Wednesday – down more than 40 basis points from the current deposit rate of -0.40%.
The EUR, therefore, could rise sharply if the ECB delays QE. ING does see a possibility of QE delay due to opposition by hawks.
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