In view of Carsten Brzeski, chief economist at ING, latest disappointing macro data, tentative signs that the resilience of the domestic economy is faltering, a potential rate cut by the Fed and continued dovish communication from ECB officials since Sintra have all pushed the ECB closer to action at the July meeting in two weeks from now.

Key Quotes

“The ECB and Mario Draghi have let the genie of more action out of the bottle and it will be hard to get it back in.”

“The ECB can hardly continue talking the talk without walking the walk. The only question is whether words alone, as dovish as they might be, will be enough at the July meeting.”

“We think the only option to once again only talk the talk would be a change in forward guidance, including “or lower”, and thereby opening the door for rate cuts. Then, September could see a bigger package than initially anticipated, possibly consisting of a 20bp cut in the deposit rate and a restart of QE.”

“With an increasing risk that this package will already be delivered in two weeks from now. Whether it is July or September, Mario Draghi will definitely leave office with a bang.”

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