The ECB 8th June meeting has become a critical event. With EU economic data continuing to outperform and French legislative elections further removing political risk, the ECB has additional freedom to adjust policy. Traders are listening for the slightest less dovish monetary guidance language from Draghi and the committee. German Chancellor Merkel’s recent complaining that the euro is “too weak because of ECB policy” has publicly increased German dissatisfaction with inflation levels. While it’s significantly too early for actions, we could get a shifting of forward guidance by removing the bias for lower interest rates or additional QE. This shift would be significantly bullish for the single currency.
EUR/USD was moving sideways at around 1.1170 this morning. The economic agenda is very light today; however Mario Draghi’s speech before the European Parliament may trigger some volatile moves later this afternoon.
By Peter Rosenstreich