ECB disappoints in first tool, two more to go

European Central Bank (ECB) has underwhelmed market in its first tool, as it cut deposit rates by 10 basis points to -0.3%.

In our article, name "Can ECB surprise market" we pointed that general consensus in the market has been a rate cut of at least 13.5 basis points, so 10 basis points was clearly disappointing.

Rest of the measure would be announced at press conference.

Euro is currently trading above 1.07 against Dollar.

One might point out that 3.5 basis points miss is not big, but it compelled market participants to think that ECB may not be as dovish as originally thought.

Bar is now at much higher for rest of the two instruments. ECB needs to do more to win over the disappointment.

Any extension of the duration below six months will now be another disappointment, whereas any asset purchase at € 20 billion higher would win back the required dovish mood.