EUR/USD – Listless as Markets Await ECB Statement

EUR/USD is showing little movement on Thursday, as the pair slightly above the 1.16 line in the European session. The markets are anxiously awaiting the ECB policy meeting later today, with the ECB widely expected to announce a QE program. There is also concern about the Greek elections on Sunday, as the Syriza party, which has promised to tear up Greece’s bailout agreement, leads in the polls. In the US, today’s highlight is Unemployment Claims, with the indicator expected to dip to 301 thousand.

As the markets nervously eye the ECB policy meeting later on Thursday, is the euro’s inactivity the calm before the storm? It appears that the ECB will flash its trump card and implement a QE program. However, now that a QE is likely priced in, the question remains what will be the size of the program? The markets are anticipating QE of between EUR 500-600 billion, but some market players are saying that the ECB could go as high as EUR 800 billion. There’s a strong chance that the euro could take a hit after the ECB statement, unless the ECB surprises with a “QE lite”, such as EUR 300 billion, which would be well below expectations.

There was excellent news out of Germany on Wednesday, as ZEW Economic Sentiment climbed to 48.4 points, crushing the estimate of 40.1 points. This marked the indicator’s highest level in 11 months, pointing to strong optimism among German investors and analysts. Eurozone Economic Sentiment, improving to 45.2 points. This easily surpassed the forecast of 37.6 points. The news was not as positive on the inflation front, as German PPI dropped 0.7%, its worst showing since April 2009. With the Eurozone struggling with deflation, there is growing expectation that the ECB will announce a QE package at its policy meeting later on Thursday.

EUR/USD 1.1631 H: 1.1638 L: 1.1576