ECB: 10bps depo rate cut and new lending measures expected – TDS

FXStreet Team FXStreet

Strategists at TD Securities analyzes the three scenarios ahead of the European Central Bank decision, the first with Lagarde at the helm. They think the FX market will continue to reward currencies where the authorities provide ample support measures.

Key quotes

“Hawkish: 35%. Rates, QE, and forward guidance unchanged. Statement outlines TLTRO changes/new lending programme. EUR/USD may knee-jerk higher, but this is likely to fade as macro risks intensify.”

“Base Case: 45%. 10bps rate cut on top of targeted lending programme. EUR/USD may dip initially but we think measures to support growth are stronger positives in the current environment.”

“Dovish: 20%. ECB adds further QE to targeted lending. EUR/USD is pressured lower initially, but support emerges as the commitment to draw a line under macro risks is clear.”

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FXStreet Team

FXStreet

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