Preview: Draghi’s speech at Frankfurt European Banking Congress

The European Central Bank (ECB) President Draghi’s speech is likely to be the main event risk in a data-light European session ahead. Draghi is due to deliver the keynote speech at the Frankfurt European Banking Congress that is scheduled at 0830 GMT.

Draghi is likely to speak on the theme of "Back to Normal - What Does It Mean?" that includes topics such as:

• Moving towards tomorrow's business models: fine-tuning or disruption?
• Technology in finance: ever broader, ever deeper?
• Macroeconomic Implications of a return to a "normal" monetary policy.

Markets will pay close attention to any fresh hints on the monetary policy or Eurozone economy. Although, no surprises are expected as the ECB remains on track to unwind its massive asset purchases programme (QE) in December. However, Draghi may sound cautious on the Eurozone growth outlook, as the European political risk remains in focus.

At its Oct 25th monetary policy meeting, Draghi noted: “If the lack of solutions in the negotiations around Brexit continues and remains as the end date gets closer, the private sector itself will have to prepare for a hard Brexit... I would not call it a big financial stability risk, but financial uneasiness.”

How could it impact EUR/USD?

According to Omkar Godbole, Analyst at FXStreet, “The EUR/USD is attempting a break above the upper edge of the falling wedge at a time when the treasury yields are looking toppy. The wedge breakout, if confirmed, would confirm a bearish-to-bullish trend change. The pair is chipping away the wedge hurdle of 1.1338. A daily close above that level would confirm a breakout - the sell-off from the September high of 1.1815 has ended and the bulls have regained control. The move, if backed by a double bottom bearish reversal in the US 10-year treasury yield, could yield a stronger rally toward 1.1586 (61.8% Fib R of Sept/Nov drop).”

Key Notes

Eurozone: Draghi and CPI in focus today - TDS

EUR/USD Forecast: Bearish bias remains; fall to 1.12 mark still looks a distinct possibility

About Draghi’s speech

As part of his job in the Governing Council, he gives press conferences in the back of how the ECB observes the current European economy. President's comments may determine positive or negative the Euro's trend in the short-term. Usually, if he shows a hawkish outlook, that is seen as positive (or bullish) for the EUR, while a dovish is seen as negative (or bearish).