ECB meeting to be on a dovish tone, focus on Greece

The Governing Council will already on Sunday need to decide whether to allow and increase the ELA to Greek banks, with political backing, or declare one or more of them insolvent. Next week's ECB meeting will obviously focus on the fall-out from Greece. 

Should there be no agreement, ELA would be shut, but realistically we would expect the ECB to try to find a way of gradually unwinding the ELA as Grexit becomes a fact. On monetary policy, we expect no changes from the ECB but still with a dovish message that it stands ready to deploy all the instruments available within its mandate. 

Unless there is a significant reaction in financial markets following a Grexit, implying a persistent unwarranted tightening in monetary policy, there is no need to expect an increase in the size of QE. 

The announced "front-loading" provides some flexibility but has been less than expected so far, which could explain the recent expansion of the list of agencies into what many consider corporate debt.

 The QE programme to be expanded to corporate bonds and extended until mid-2017 by next spring. The economic outlook is continuing to improve but President Draghi is likely to maintain a dovish tone, also in view of uncertainties over the strength of the global recovery and still low inflation expectations, says Societe Generale.