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4 Nov 2013
Will the ECB send a dovish message?
FXstreet.com (Barcelona) - The European shared currency showed one of the poorest performances YTD last week, if one is to take as reference price activity since the Oct 30 FOMC-induced falls, which was followed by deflation fears-driven selling, resulting in more than 2 cents shred with the most worrisome sign being the lack of rebounds.
What EUR price action indicates in the charts is a radical change of perceptions towards ECB monetary policies before year-end, as market seems now heavily inclined to price in the ECB sending a dovish message on Thursday.
According to Alan Wheatley from Reuters: "After a plunge in inflation to 0.7% in the year to October, well below the ECB's target of just under 2 percent, UBS and RBS are among those who reckon a rate cut could come as soon as Thursday's policy-setting meeting. At the very least economists expect ECB President Mario Draghi to indicate that the balance of risk has tilted toward further easing, partly because the recent strength of the euro will hurt exports with a lag."
In view of Jamie Coleman, Analyst at FXstreet.com: "The ECB could cut as soon as next Thursday", adding that "my feeling is that they will signal a cut at that press conference but hold off on the actual cut until the December meeting."
Jamie believes that if the ECB employs any of the other strategies at hand - cut the main refinancing rate, negative rates on deposits, another round of Long-term refinancing operations (LTRO), which he does not expect at this time, "it would be an admission by the ECB that things are far worse than we know, and the euro would be hit quite hard as a result."
What EUR price action indicates in the charts is a radical change of perceptions towards ECB monetary policies before year-end, as market seems now heavily inclined to price in the ECB sending a dovish message on Thursday.
According to Alan Wheatley from Reuters: "After a plunge in inflation to 0.7% in the year to October, well below the ECB's target of just under 2 percent, UBS and RBS are among those who reckon a rate cut could come as soon as Thursday's policy-setting meeting. At the very least economists expect ECB President Mario Draghi to indicate that the balance of risk has tilted toward further easing, partly because the recent strength of the euro will hurt exports with a lag."
In view of Jamie Coleman, Analyst at FXstreet.com: "The ECB could cut as soon as next Thursday", adding that "my feeling is that they will signal a cut at that press conference but hold off on the actual cut until the December meeting."
Jamie believes that if the ECB employs any of the other strategies at hand - cut the main refinancing rate, negative rates on deposits, another round of Long-term refinancing operations (LTRO), which he does not expect at this time, "it would be an admission by the ECB that things are far worse than we know, and the euro would be hit quite hard as a result."