The European Central Bank (ECB) is scheduled to announce its monetary policy decision later today at 14:45 GMT, which would be followed by the ECB President Mario Draghi's post-meeting press conference at 12:30 GMT.
ECB to steer rates on a steady course
The ECB Governing Council is widely expected to keep the interest rates on its main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at zero, 0.25 and -0.40 percent respectively.
But, the main focus today remains on the details of the statement, including latest economic forecasts that would follow at ECB President Mario Draghi’s press conference 45 minutes later.
Also, markets eagerly await the decision whether the central bank would announce scaling back its EUR 2.55 trillion stimulus measures later this year, in light of the persisting downside risks to the Euro area economic outlook and increased political risks.
Analysts at ING believe that the ECB will announce an extension of QE at a reduced pace of EUR 10 billion per month at least until December 2018.
How could it affect EUR/USD?
“The announcement of a lower pace of asset purchases over 4Q (from €30 billion to €10 billion) should be EUR/USD positive as (a) signaling-wise, it brings us closer to the eventual end of QE; (b) volume-wise, €10 billion per month is a limited amount. Yet keeping the programme open-ended (i.e. the ECB will not commit to an end date) should mitigate the degree of EUR/USD upside. We thus don’t expect EUR/USD to break above the 1.20 level,” ING Analysts add.
In terms of technicals, Slobodan Drvenica, Information & Analysis Manager at Windsor Brokers, notes, “Focus is turning towards ECB's policy decision, due later today, as markets expect the central bank to give more details about the timing of winding down its QE program. The bullish scenario requires a sustained break above 1.1810 and a former high of 07 June at 1.1839 to expose Fibo barrier at 1.1881 (76.4% of 1.1996/1.1509), break of which would unmask psychological 1.20 barrier, reinforced by 200SMA.”
“Solid supports at 1.1780/70 zone (broken 30SMA / top of thick4-hr cloud) are expected to hold and maintain bullish bias. Res: 1.1820; 1.1839; 1.1850; 1.1996.Sup: 1.1780; 1.1755; 1.1724; 1.1674," he adds.
About the ECB interest rate decision
ECB Interest Rate Decision is announced by the European Central Bank. Usually, if the ECB is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the EUR. Likewise, if the ECB has a dovish view on the European economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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