ECB seen cautious today – UOB
|FX Strategists at UOB Group assessed the prospects of today’s ECB meeting.
Key Quotes
“The ECB is likely to offer little shock and awe, but in lieu of new staff forecasts, Draghi’s presser will carry additional weight as market participants try to read between the lines”.
“We think Draghi will continue with his gradual drift in rhetoric towards the eventual end to QE and negative interest rates. However, he is likely to proceed with caution”.
“We expect QE tapering to be discussed at this meeting, and the Governing Council may well hold the first in-depth discussion about the further course of monetary policy in the coming year. It would be interesting to see if the ECB will drop the option to further raise the monthly bond purchasing volume. Dropping that promise from the post-meeting statement would be a small move toward announcing a phase-out of the stimulus”.
“But no concrete decisions are to be expected, with Draghi likely to underline the need for caution in withdrawing the stimulus, even whilst pointing out the Eurozone’s strengthening recovery”.
“It does look like we could head into the press conference with EUR/USD remaining over 1.15 but shy of the recent high. But with expectations for ECB stimulus removal priced in to some extent, we caution that potential disappointment may force position unwind, and EUR may be subjected to corrective moves lower”.
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