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Talking Points:

• ECB unlikely to deliver policy change at today’s announcement

• Draghi presser in focus for guidance on future easing potential

• Markets likely to be disappointed absent strong dovish rhetoric

The monetary policy announcement from the European Central Bank headlines the economic calendar. Economists expect officials will leave the current settings unchanged this time around. Traders’ priced-in bets implied in EONIA futures agree. This makes sense: the ECB announced forceful stimulus expansion last month and will likely want to monitor progress for at least a few months before deciding on whether further measures are necessary.

With that in mind, comments from ECB President Mario Draghi at the press conference following the announcement may nonetheless trigger volatility. The Euro rallied even as the ECB eased further last month as Mr Draghi appeared to close the door for further accommodation, implying the central bank was out of ammunition. Subsequent commentary clarified that he was referring to a shift away from deposit rate cuts toward other measures, but this seemed to be mostly ignored.

Today’s meeting offers Draghi an opportunity to formally clarify forward guidance. If he uses it to unambiguously assert that the ECB is well-armed to deliver greater easing and is prepared to do it on short notice if necessary, the Euro is likely to weaken. Risk appetite may also improve, sending the Australian, Canadian and New Zealand Dollars higher alongside stock prices. The absence of a forceful dovish message may leave investors disappointed however, triggering the opposite results.

Are FXCM traders buying or selling the Euro ahead of the ECB rate decision? Find out here!

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