The ECB meeting is drawing near and here is a quick and short preview from SocGen:
Here is their view, courtesy of eFXnews:
1. Deposit rate: current -0.30%
SG forecast: -20bp to -0.50%
Consensus: -10bp Forecast range: no change to -20bp
2. Asset purchase programme : current €60bn/month until March 2017 (sovereign, ABS, CB)
SG forecast: no change
Consensus: no change, 60% chance of programme expansion by €10bn to €70bn
3. 3y TLTROs
SG forecast: extension to 2017
Consensus: n/a
4. Tiered interest rate system on excess reserves
SG forecast: two-tier system ECB to copy the BoJ? Required minimum reserves with the BoJ have an interest rate of 0%, excess reserves in existence in January will earn 0.1%, new excess reserves created by the future expansion of the BoJ balance sheet are subject to an interest rate of -0.1%.
Consensus: n/a
Bottom line:
Further easing is expected from the ECB this week, but it is unlikely to push the EUR/USD exchange rate lower durably. We do not expect EUR/USD to break below the 1.04/1.05 low reached in 2015 over the course of this year, short of a Brexit scenario.
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