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Currency Analyst since 2010

EUR/USD: what to expect from the ECB?

Elizaveta Belugina

On Wednesday don’t miss the European Central Bank’s meeting (11:45 GMT) & Mario Draghi’s press conference (12:30 GMT).

The ECB is expected to keep its policy unchanged: low rates + buying 60 billion euro of government bonds a month. The market’s attention will focus on what Mario Draghi will say.

As the recent economic data from the euro area showed improvement, Draghi is expected to observe that the quantitative easing program is already bringing positive results. At the same time, it’s clearly too early for him to sound too optimistic and give any comments about reducing the size of QE. Data released recently showed that the euro area’s Producer Price Index rose by 0.5% in February after declining by 1.1% in January. The region’s manufacturing PMI also rose in March. This Friday don’t miss Europe’s final inflation figures for March.

Last week ECB Executive Board Member Yves Mersch said that if inflation expectations rise faster than expected towards the ECB’s target of below-but-close-to 2%, the QE program could be stopped earlier than planned, which is September 2016. Draghi will probably try to smooth Mersch’s comments and press the point that tapering QE is for now out of question. This may add pressure on the euro.

 

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