FXstreet.com (Barcelona) - TD Securities Team is calling for an unchanged policy decision by the ECB today, despite strong consensus of a 25bps cut to the refi and deposit rate. However, the team, in plain terms, also notes "it’s hard to remember a previous ECB meeting that had this much uncertainty over a decision that was likely to matter so little."

Richard Kelly, Head of European Rates and FX Research, comments: "The argument for the rate cut is purely as a token gesture that the ECB is willing to do more, but we worry that the market will quickly move on after such a token gesture and is unlikely to fuel any sustained risk taking or peripheral spread compression. The risk of a rate cut is high, but even if the ECB cuts, we see a significant risk the market is disappointed within 24 hours as the market moves on with the ECB not ready to provide a clear answer to the ‘what next’ question."

Richard expects a new 3y LTRO announced in either August or September, "though if ESM buying of debt can be activated before then, it may replace the need for the ECB to act" he adds.