Euro Looks to ECB Projections, Draghi Presser for Policy Clues

The Euro looks to an updated set of ECB economic projections and President Mario Draghi’s press conference for guidance on the direction of monetary policy.

Talking Points

Euro Sets Sights on Draghi Press Conference, ECB Growth Projections Update
British Pound Unlikely to Find Serious Catalyst in the BOE Policy Announcement
Australian, NZ Dollars Fall in Asia as Fed QE Cutback Bets Drive Risk Aversion

Interest rate decisions from the European Central Bank (ECB) and the Bank of England (BOE) headline the economic calendar in European trading hours. An overt change in the policy mix is unlikely on either front, but the ECB outing offers greater scope for volatility as investors turn to central bank President Mario Draghi’s press conference for forward guidance.

Rhetoric suggesting an open door to negative deposit rates or another form of non-standard easing is likely to weigh on the Euro. An updated set of staff economic projections is also due, with significant downward revisions that fuel stimulus speculation threatening to put pressure on the single currency. The absence of dovish cues is unlikely offer support however. Such an outcome would amount to the status quo given the pickup in priced-in ECB policy expectations since the May meeting, leaving the European unit looking elsewhere for direction.

Turning to the BOE, another non-event seems to be in the cards. Economic data has not meaningfully deteriorated relative to expectations since the May sit-down, meaning the doves on the rate-setting MPC committee are unlikely to have swayed enough of their colleagues toward an expansion of quantitative easing. With that in mind, the announcement seems unlikely to be a major market-mover for the British Pound.

The Australian and New Zealand Dollars underperformed in overnight trade as Asian stocks declined, weighing on the sentiment-sensitive currencies. The MSCI Asia Pacific regional benchmark stock index fell 1.1 percent, following a dismal showing on Wall Street. US shares declined as the ISM gauge of service-sector activity topped economists’ expectations, feeding speculation about a tapering of Fed QE3 asset purchases and weighing on risk appetite.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

1:30

AUD

Trade Balance (A$)

28M

180M

555M

2:00

JPY

Tokyo Avg Office Vacancies (%)

8.33

–

8.54

Euro Session:

GMT

CCY

EVENT

EXP

IMPACT