Lagarde could display 'hawkish undertones' in the face of recent economic resilience at ECB meeting

The next few days will be important ones across both sides of the Atlantic. Given the lack of domestic news on tap, EUR/USD will trade almost entirely off the Fed announcement today.

Tomorrow will be a different story, as markets will have both the preliminary third quarter GDP figures and the ECB policy decision to digest.

As for the former, economists are pencilling in modest growth of 0.1% in Q3 that, while far from spectacular, will be taken with a pinch of salt given the yet to materialise boost from Germany’s massive stimulus programme. As mentioned in our ECB preview report, Thursday’s Governing Council meeting will likely be largely a non-event.

The ECB’s rate cutting cycle appears to be over, at least for now, with firmer business activity and rising inflation leaving few doubts that the Governing Council will sit on its hands for a while yet.

We expect that the tone of Lagarde’s press conference will be mostly neutral, although she could perhaps display hawkish undertones in the face of the recent economic resilience. This could provide the euro with some modest support, although expectations for further cuts are so low that we don’t think her remarks will have much in the way of impact on the common currency.