Tips from Barclays: how to trade ahead of Thursday’s ECB meeting
The European Central Bank’s meeting scheduled for this Thursday will probably take most of the attention of the market this week. It is expected that there won’t be any changes in monetary policy this month. The recent rumors on QE tapering have been dismissed by ECB senior officials. Growth and inflation in the Eurozone still hardly reach the targets, so, It’s too soon for the ECB to start withdrawing monetary accommodation. The current asset purchase program (APP) is due to expire at the end of March 2017; this ECB conference will be closely watched for signs whether QE will be extended further and if it is extended, when it will happen.
Barclays recommends to sell EUR/USD ahead of the ECB meeting on the 20th of October. It entered short via filling a limit order at 1.0990 with a target at 1.0815 and stop-loss at 1.1170. Barclays believes that a possible extension of APP and changes into the QE program will be announced in December. However, Mario Draghi will likely be asked about QE tapering during the press conference. He may answer that it is a bit premature to speak of the QE tapering now. His responses could add some fuel to the EUR/USD movement on Thursday.
Societe Generale also predicts a rough week for the euro and believes that it may weaken in course of the upcoming trading session with the USD strengthening on the probability of rate hikes in December and QE talk in the Eurozone.