Tuesday September 10, 2019 - 14:03:50 GMT
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Forex View: Will the ECB Disappoint?
The highlight of the week will be Thursday’s ECB meeting where a stimulus package is widely anticipated. The question is whether the ECB will meet, surpass or fall short of market expectations? Logic says given markets have been trading on an easing of policy since the last ECB meeting, a disappointment would likely see the bigger reaction.
So let’s take a look at what is expected
1) A .10bps cut in the deposit rate to -0.5%
2) Introduction of tiering (i.e. reducing excess liquidity that is subject to the depo rate), or something similar
3) Restart of monthly asset purchases.
#3 is where there is scope for expectations to be exceeded or disappoint. I have seen forecasts ranging from EUR30-50 bln with a duration of six months to one year. There seems to be more uncertainty than usual despite forecasts expecting a resumption of QE. The uncertainty may be coming from apparent opposition from some ECB members to the restart of the asset purchase program.
Given that Draghi’s term as ECB president is due to expire on Oct 31, 2019, it remains to be seen how aggressive he will be at this meeting. In any case, markets are looking for a broad stimulus package which in any case will see volatility once it is announced.
Keep abreast of how the market reacts and get access to a platform from a quality forex broker offering tight spreads and excellent customer service.
Jay Meisler, co-founder
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