ECB meeting, a currency war of words and inaction

ECB President Draghi was more dovish than expected, resulting in a large drop in the EURUSD. Specifically, the Governing Council re-inserted the possibility of cutting the deposit rate into the ECB's toolbox, which is in line with economists views, while tasking the ECB's relevant committees to examine the pros and cons of various instruments. Draghi also promised more action if the convergence of the inflation path to the target is pushed back, suggesting that the December inflation forecasts will be crucial.

"We still expect euro area data to show resilience in the short-term and thus see a December move as a less likely, but close, call, instead saving some ammunition for the long-term fight against lowflation. We expect an extension of the QE and TLTRO programmes beyond September 2016, adding also corporate bonds in the spring of next year", says Societe Generale.