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Strategists at TD Securities have changed their view and are now expecting a rate cut by the ECB due to the tightened financial conditions, the negative macro impact of the coronavirus outbreak with Italy now in total lockdown, and the euro’s volatility. 

Key quotes

“We now look for the ECB to deliver a 10bps rate cut at Thursday’s policy meeting. We will look for direction from Lagarde as to how much further easing the ECB is considering.”

“At this stage, we still don’t think that the ECB is likely to augment the pace QE.” 

“Even with a 10bps rate cut and other mitigating measures, we still believe that the market is going to be disappointed, especially given the rout we saw after the Fed’s much more aggressive 50bps inter-meeting rate cut.” 

“The tone of the press conference will be key, but we’re not convinced that a very green Lagarde will be able to persist with her consensual Governing Council approach but still deliver the ‘whatever it takes’ message that markets want to see.”


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