Citi Research discusses its expectations for the ECB's July policy meeting.
"We expect the ECB to introduce an easing bias in July and thereafter a 10bp deposit rate cut, tiering of excess reserves and new asset purchases by September. Overall, the ECB will therefore help to underpin ‘lower for longer’ yields globally, push down periphery spreads, support European credit spreads and, at least temporarily, European equity prices – and cap the euro," Citi projects.
"We remain tactically bearish USD into Fed cuts but we favor CAD or NOK over EUR including due to the prospect of ECB easing. ECB policy may also re-encourage use of EUR as funding currency for EM longs," Citi adds.