ECB's deposit rate cut likely in December

The ECB meeting in October was quite dovish, as a result, a sharp decline in the EUR/USD is observed. Particularly, the Governing Council re-inserted the likelihood of cutting the deposit rate into the ECB's toolbox.

The minutes of the January meeting confirmed that the ECB contemplated purchases of corporate bonds in order to complement its QE program. The same incidence could have also been happened at the October meeting. The press reports shows that the ECB is investigating for any possibility of purchasing of municipal and regional bonds, mainly to boost the available German assets if the QE program is extended.

"Our view is that the ECB will have to take substantive action in December. We expect: 1) a 10bp deposit rate cut; 2) an increase in the size of asset purchases from €60bn to €70-€80bn (with the addition of corporate bonds); 3) an extension of the QE and TLTRO programmes beyond September 2016", says Societe Generale in a research note.