Brace yourselves, euro traders! The ECB will be making its monetary policy decision this week and also updating their economic forecasts. Here’s what to expect.
ECB policy statement (Mar. 7, 12:45 am GMT)
The shared currency might be off to a slow start for the week since there are no major events lined up and traders might be biting their nails ahead of this top-tier catalyst.
ECB Governor Draghi and his fellow policymakers are scheduled to announce their monetary policy decision, which would likely be to keep rates and bond purchases unchanged for the time being. Many analysts believe that this might be a dovish hold.
For one, there has been some chatter about a new lending facility or TLTRO (targeted long-term refinancing operation) that could ease some financial strain on banks and short-term liquidity.
Another thing to watch out for is the release of updated economic forecasts by the ECB staff. Recall that the central bank already announced negative revisions earlier on, and the recent batch of disappointing economic figures could warrant even more downgrades.
In particular, preliminary inflation readings continue to show signs of weakness as underlying data printed declines even while the headline figure ticked up from 1.4% to 1.5% last month. This could give the ECB grounds for reiterating that they don’t plan on hiking rates in the foreseeable future.
If you’re trading this event, don’t forget that there will be a presser a few minutes after the actual announcement, which should give Draghi more room to explain his views. Watch out for additional volatility depending on his Q&A responses!
Overall sentiment and USD action
This week might also shape up to be an eventful one for the dollar since the NFP release is coming up. And since the euro takes the opposite direction of the scrilla in some instances, it’s definitely worth keeping tabs on how USD catalysts turn out.
The Swiss franc isn’t really looking forward to top-tier releases this week, although the jobless rate and SNB foreign currency reserves report might still trigger short-term moves. This could leave it sensitive to changes in sentiment, with risk-off flows usually supporting the lower-yielding franc.
Missed last week’s price action? Read the EUR & CHF price review for February 25 – March 1.