The EUR has come off its highs and this should presumably lessen the concerns at the Governing Council that unwarranted FX appreciation will add to the headwinds for growth and inflation.
This need not mean, however, that the ECB is now more relaxed about the outlook for the Eurozone. Indeed, Eurozone financial conditions have not benefited from the latest rally in global risk sentiment.
Also of concern is that Eurozone financial stocks are struggling to rally despite the latest ECB measures to revive domestic demand by providing cheap funding to the banks.
Copy signals, Trade and Earn $ on Forex4you - https://www.share4you.com/en/?affid=0fd9105
Last but not least, EZ inflation expectations have deteriorated further despite the bounce in global commodity prices. While the weaker growth outlook may be to blame, we consider the persistent resilience of EUR TWI likely played a role as well.
The ECB may not mention the EUR this week but will keep the door wide open to more accommodation.
While the single currency may recover in the immediate aftermath, the longer-term risks for the currency should be on the downside.