Today's European Central Bank meeting is in the middle of the French Presidential election and the European institution certainly welcomed Emmanuel Macron's victory in the first round as there were certainly fears of a second round pitting Jean-Luc Mélenchon against Marine Le Pen.
Now ECB President Mario Draghi, whose press conference will be given at 1.30pm CET, is going to discuss his views regarding the Eurozone recovery. For the time being, it is very likely that the current level of asset purchases (€60 billion) will continue until year-end. We believe that for some more time, the ECB will remain committed to low rates.
Financial markets are clearly not pricing anything else but a Macron victory in France, which seems to rule out any political risks for the ECB. In Europe, economic fundamentals are better, inflation is picking up and unemployment has decreased, even though it remains very high in peripheral countries. So this meeting will be useful to assess the degree of optimism that could lead to a tightening policy in the near future. Markets are likely to price in better confidence and we remain bullish on the Euro in the short-term.
By Yann Quelenn