We do not expect ECB policy action this week, but guidance is that the ECB has its finger on the trigger for more PEPP (Pandemic Emergency Purchase Programme). Communication will not be easy, but EUR appreciation, record low core inflation and Fed policy should make for very dovish tones. We expect €500bn more PEPP in December, but inflation expectations urgently need attention too. Front-end rates will likely be supported by FX concerns, but credit risks are increasingly underpriced in by the market. Beyond verbal intervention, we think the ECB has limited options to weaken EUR for now.
The ECB meeting this week should be a non-event, but risks are for a hawkish surprise in tone. We will be all ears on two elements: the timeline and the motivation for the review that starts this week and finishes before the end of 2020.