According to analysts at TD Securities, the ECB threatened to put all policy levers on the table this week, but they are looking for a simple announcement of generous TLTRO terms.
“We see risks the ECB could tweak policy rate forward guidance, however.”
“Rates: Generous TLTRO terms support tighter EGBs vs Bunds spreads. Any intention to cut rates could push bunds below the -25bps mark. We continue to favor steepening bias for the curve expressed via 5s10s EUR IRS steepeners.”
“FX: This outing may be more about the financial plumbing but a dovish shift would cap recent gains and put fresh downside EUR risks sub 1.11 back into view. With the USD now on the defensive amid Fed rate cut hopes, our hawkish scenario could see EURUSD break into a new trading range above resistance near 1.1325.”
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