Last month’s ECB meeting was surprisingly muted, with most members of the Governing Council appearing to opt for a wait-and-see approach after the Brexit referendum. The minutes released today could nevertheless provide some colour. In particular, we look for clues on the willingness of changing the issue limits on its purchases.

We believe the ECB very soon will need to change the limits so as to reassure observers that they can indeed run the programme until March 2017.

ECB minutes may provide colour after last month’s wait-and-see approach, today’s ECB minutes could provide some colour on the Governing Council’s assessment of what the drop in interest rates, following the Brexit vote, could imply for the ECB’s asset purchase programme.

Elsewhere, please be mindful of OTC order flow analysis:

EURO vols have been the least among G10 currency space ever since ECB’s dovish stances, risk reversal began favouring intermediary bulls.

The implied volatility of ATM contracts for near month expiries of the euro crosses are creeping in snail’s pace among G10 space.

While the delta risk reversals flashing up progressively with positive numbers especially in 1w tenors that signify hedging sentiments are bias for upside risks.

While current IVs of ATM contracts are at higher levels but likely to perceive hover around at an average 12.28% in the long run that would divulge pair’s gain contemplating risk reversal arrangements.

In particular, we look for clues on the willingness to change the issue limits on its purchases. We believe the ECB very soon will need to change the limits so as to reassure observers that they can indeed run the programme until March 2017. On the data front, the final HICP euro inflation should confirm the flash estimate of 0.2% YoY for July.

Hence, considering both central bank’s guidance and OTC markets reasoning we think upside risks are on the cards momentarily, as a result we reckon deploying ATM instruments in hedging strategies are worthwhile.