Macro Digest: It's time for the ECB to panic

Second, the ECB's 'old' package of Targeted Longer-Term Refinancing Operations, or TLTROs, runs out in 2020. Fundamentally, the ECB does not believe in applying more stimulus from quantitative easing and TLTROs but it needs to build a bridge to a 'fiscal expansion/modern monetary theory' stance in end-2019. 

The market has priced in TLTRO operations; look at the Stoxx Bank Index (SX7E), which is up by more than 14% year-to-date. Consider as well that the Bundesbank does not favour further buying.

We are in a period of record low volatility in EURUSD, with today's meeting having the ability to shake things up significantly, depending on the ECB's statement.

EURUSD volatility is cheap. As such, we are looking at options straddles or EUR puts into today's meeting.

The market is more likely to be disappointed by any potential 'delays' raised in today's announcement. In our view, such an outcome could see EURUSD break 1.12.