ECB Preview: What to Expect of EUR/USD

ECB Preview: What to Expect of EUR/USD

2 June 2016, 11:57
Roberto Jacobs
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ECB Preview: What to Expect of EUR/USD

The European Central Bank will hold its meeting later in the European afternoon. Market consensus expects the central bank to refrain from acting on monetary policy, while it remains in ‘observation mode’ following the recently announced measures.

Market expectations, however, are tilted to the hawkish side, as the Council is seen revising higher its projections for inflation and growth in the region for this year until 2018. The implications of a potential ‘Brexit’ scenario could also be on today’s agenda, adding extra relevance to the meeting and subsequent press conference.

Regarding the potential tone at Draghi’s press conference, strategists at TD Securities argued “He will likely keep to his refrain that the ECB will do more if needed, but he repeats his March message that the GC does not anticipate having to cut rates further under the current projection”.

All in all, it seems the meeting could be EUR-supportive a priori, although the extent of the probable up tick in EUR/USD should be limited around last week’s tops in the mid-1.1200s. However, in the unlikely scenario of a dovish ECB, the likeliness of a visit to recent lows in the 1.1100 neighbourhood could re-emerge.


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