Likelihood of ECB's December action rising

Last week after the ECB meeting, a December move was seen as less likely, but still very possible, than a March 2016 move. A series of developments (dovish tone from ECB board members, weakness in credit dynamics, Fed action delayed) has changed this assumption. 

"The new take is that the ECB now looks increasingly set to act in December. It is expected that a 10bp deposit rate cut, which happened the last two times, an increase in the size of asset purchases from €60bn to €70-80bn (adding also corporate bonds), an extension of the QE and TLTRO programmes beyond September 2016. The ECB is likely to indicate that the QE programme will run until inflation rates near 2%", says Societe Generale.

The reasoning was mainly based on the expected improvement in newsflow (solid growth, higher inflation, concerns about China, etc.) in the coming weeks and doubts about the effectiveness of the ECB toolbox. 

In particular, the ECB would prefer to save some ammunition for the long-term fight against lowflation.