The European Central Bank (ECB) has sent strong signals that another easing package is in store at the next meeting in December, with the economic outlook notably darkening, says Jan von Gerich, chief analyst at Nordea . He points out that the position leaves more room for bond yields and EUR / USD to fall further.
“In the short end of the curve, market prices in more than 10bp cut rates until next fall, implying that a further 10bp drop in deposit rates is in prices. We do not expect the ECB to lower the deposit rate any further, as the Governing Council has not shown an appetite for further rate cuts lately and has focused on other forms of relaxation. A further cut in the TLTRO rate seems more likely. Nonetheless, another cut in deposit rates cannot be completely ruled out, if the ongoing investigations in the ECB committees lead to a recommendation for a further rate cut and the euro strengthens before the ECB meeting. . The prioritization multiplier could also be increased in December. “
“On the currency front, the ECB has now confirmed that it will fight against a rapid strengthening of the euro and, combined with the negative economic dynamics in the euro area, such a message should help keep the EUR / USD at short-term decline. “