Dovish ECB should lead to a reversal of the latest steepening move

While the ECB will be likely to deliver a dovish message, it is unclear whether the Governing Council would consider recent developments big enough to tweak the QE programme in terms of size, extension of the eligible assets universe, or extension of the program beyond September 2016. 

"Even if the ECB does not act in September, ECB President Draghi might give some hints for possible actions at the October or December meeting, especially if the downward revisions to 2016 and 2017 inflation projections are noteworthy", says Barclays.

A dovish rhetoric that would suggest an extension of the QE purchases (in terms of size, scope, maturity) would help reduce the term premium on the long part of the money market curve, thus favouring a reversal of the recent steepening movement. 

"The very front end of the money market curve should be only marginally affected, given the already abundant liquidity and the low level of rates close to the depo facility. Therefore, long ERM7 versus ERM6 is recommended", added Barclays.