- Broad Views Surrounding European Central Bank (ECB)- Are They Priced-In?
- President Mario Draghi to Implement Verbal Intervention?
Trading the News: European Central Bank Interest Rate Decision
According to a Bloomberg News survey, 62 of the 66 economists polled see the European Central Bank (ECB) largely maintaining its current policy this month, but the broad range of expectations (rate cut, negative deposit rates, verbal intervention, non-standard measures) may produce increased volatility around the event as market participants weigh the outlook for monetary policy.
What’s Expected:
Time of release: 02/06/2014 12:45 GMT, 7:45 EST
Primary Pair Impact: EURUSD
Expected: 0.25%
Previous: 0.25%
DailyFX Forecast: 0.25%
Why Is This Event Important:
Indeed, the ECB remains poised to further embark on its easing cycle amid the heightening threat for deflation, while central bank President Mario Draghi may look to verbally weaken the single currency in an effort to further insulate the monetary union.
Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| Euro-Zone Retail Sales (MoM) (DEC) | -0.7% | -1.6% |
| Euro-Zone Producer Price Index (YoY) (JAN A) | -0.8% | -0.8% |
| Euro-Zone Consumer Price Index (YoY) (JAN A) | 0.9% | 0.7% |
Subdue growth and inflation certainly raises the risk of seeing the ECB surprise with more easing, but even a further willingness to implement additional monetary support could be enough to spark a sharp selloff in the EURUSD amid the protracted recovery in the euro-area.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| Euro-Zone ZEW Survey- Expectations (JAN) | -- | 73.3 |
| Euro-Zone Trade Balance s.a. (NOV) | 1.4% | 1.8% |
| Euro-Zone Industrial Production s.a. (MoM) (NOV) | 1.4% | 1.8% |
Nevertheless, the ECB may merely stress a more dovish twist to its forward-guidance as there appears to be a growing rift with the Governing Council, and a neutral policy stance may help the euro to sustain a larger rebound as market participants delay their bets for more easing.
How To Trade This Event Risk(Video)
*Trading the ECB interest rate decision may not be as clear cut as some of our other trade setups as the press conference with President Draghi ends with a Q&A session
DailyFX on Demand Will Have Full Coverage of the ECB Meeting
Bearish EUR Trade: ECB Loosens Policy and/or Publishes Detailed Easing Timeline
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Need red, five-minute candle following the decision/statement to consider a short Euro trade
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If market reaction favors a short trade, sell EURUSD with two separate position
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Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
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Move stop to entry on remaining position once initial target is met, set reasonable limit