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Whattup, forex junkies! On Thursday at 11:45 am GMT the European Central Bank (ECB) will publish its monetary policy decision for the month of July. A presser will then follow an hour later at 12:30 pm.

Think you’re ready to trade the event? Let’s have a quick review of what happened last time and what market players are expecting from the central bank this time around.

What happened last time?

  • No changes to refinancing (0.00%), marginal lending (0.25%), and deposit rates (-0.40%) as expected
  • QE program to continue at €30B per month until end of September 2018
  • QE program could be reduced to €15B per month and end on December 2018
  • ECB: interest rates to remain unchanged “at least through the summer of 2019”
  • 2018 GDP forecasts revised lower
  • 2018 and 2019 inflation estimates revised higher
  • EUR drops like there’s no tomorrow

The ECB sure made a splash last month! While Governor Mario Draghi and his gang kept their key interest rates and asset purchases steady as expected, they also dropped a bombshell (or two) that shook the markets.

First is the decision that the central bank is planning on halving its asset purchases from €30B to €15B from September until they ditch the program in December.

But before traders could even pick up their jaws from the floor, the ECB was also quick to share that key interest rates will “remain at their present levels at least through the summer of 2019.

This was a big deal considering that rate hike junkies were already pricing in a JUNE rate hike at the time. And to add insult to injury, Draghi also shot down hopes that “through the summer” meant “September.” This means that we won’t see a rate hike from the ECB until at least October.

EUR 1-Hour Forex Chart
EUR 1-Hour Forex Chart

The perceived delay in the ECB’s rate hike schedule, combined with a downgrade in 2018’s GDP forecasts and the fact that Council members apparently haven’t factored in Trump’s (unimplemented) trade measures against the EU, all dragged the euro lower across the board.

What are market players expecting this time?

  • No changes to existing monetary policies
  • Clarification of what “through the summer” means
  • ECB to reinforce commitment to remove stimulus

Most analysts aren’t expecting any policy changes from the ECB in July. For one thing, the euro region hasn’t churned enough top-tier data to spur action from the central bank.

ECB’s staff won’t be publishing new economic forecasts either, and history suggests Draghi and his team like to announce major decisions after seeing fresh economic estimates.

That doesn’t mean we won’t see a bit of volatility though!

Remember that the ECB took a risk in June by stepping up its tapering measures. But lukewarm results from leading indicators, hard Brexit, and escalating global trade (and currency?) war point to weak economic activity and consumer prices that make it complicated for the ECB to continue its exit process.

To ease investors’ concerns, it would make sense for the ECB to downplay downside risks to growth and reinforce its commitment to ease the pedal from the metal.

One way the central bank could do this is to be clearer on what “through the summer” means. ECB member Vitas Vasiliauskas already shared that:

“In this part of the world, summer means until the end of September.”

Word around is that some members are also “uneasy” that traders aren’t pricing in a rate hike until December 2019. Bloomberg cited “people familiar with the matter” who believe that we’ll see rate hike as early as September or October next year.

While waiting for more signals from the ECB, market players could take cues from a couple of economic reports due for release this week. Make sure you pay attention to them, too! Just keep an eye out for a buy-the-rumor, sell-the news situation, which could easily reverse the euro’s intraweek moves.

That’s it for our guide today. Don’t forget that it’s okay to stay in the sidelines if you’re not comfortable trading top-tier events like these!