Forex Flash: ECB rate cut possible but OMT is main tool – TD Securities (Barcelona) - As expected, the monetary policy remained the same with the refi rate at 0.75% and the statement didn't change much as well, pointing to risks to growth to the downside. About the growth outlook, Draghi added that “financial market confidence has visibly improved on the back of our decisions as regards Outright Monetary Transactions (OMTs) and suggested that the transmission mechanism improved, though still broken.

“We think the Governing Council has a high uncertainty over where they may be in December. They are not trying to signal the likelihood of action, but he tried hard to ensure that no options were ruled out”, wrote analyst Richard Kelly, adding that TD Securities analysts believe the ECB has wanted to use the OMT before rate cuts so that these lower interest rates would be more likely to feed through into the economies that need them, “but if the ECB now sees the announcement of the OMT having partly improved the transmission of monetary policy, and if growth prospects in core and semi-core Eurozone countries are worse, where policy can still transmit better, then the risk of a rate cut rises”. “If hard data stabilizes in the coming weeks, rate cut risks will once again recede, but regardless, the focus will remain as the OMT as the main tool currently of the ECB”, concluded Kelly.