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What to expect from ECB ahead?

What to expect from ECB ahead?

Today European Central Bank (ECB) is to provide further guidance in policy meet. Result to be announced at 11:45 GMT, followed by the press conference at 12:30 GMT. Meeting is to be held at the central bank of Latvia.

 

Current policy measures–

  • Deposit facility rate at -0.40 percent
  • Refinancing rate 0.00 percent
  • Marginal lending facility rate at 0.25 percent
  • ECB has several TLTROs in its portfolio.
  • Assets can be bought at yields below the deposit rate.
  • In the latest action, ECB tapered asset purchases to €30 billion and extended the program until September 2018.

Expectation today –

  • European Central Bank (ECB) is expected to maintain its current policy.
  • With ECB announcing clear path until September, no action is likely.
  • However, the market is looking for a guidance on future actions and a bit desperately.

What to watch out for –

  • Change in inflation forecast.
  • Take on tapering or on the future path of monetary policies.
  • The high level of NPLs in European banks, especially in Italy.
  • Political trouble in Italy, where populists have won the majority of the votes.
  • Contingency plans for a looming trade war with the United States.
  • Contingency plans from the Brexit fallouts.
  • Whether ECB seems comfortable with the level of the Euro or does Draghi talk the currency down.

Impact –

The euro has remained upbeat despite the European Central Bank (ECB) extending the asset purchase program beyond expectation. Though it has suffered decline since March/April due to rising rates in the U.S. and Italy’s political trouble.

The euro is currently trading at 1.18 against the USD.

 

Source: FXWire Commentary

 

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