Think the RBA will lift rates on Melbourne Cup day? Don't bet your house on it 
Will the RBA raise rates again? Unless prices surge over summer, it's looking less likely 
The Federal Reserve held off hiking interest rates 
Why the Bank of England is now more upbeat than the IMF 
If central banks don't start cutting them soon, it could actually increase inflation 
Inflation: raising interest rates was never the right medicine 
FxWirePro: Daily Commodity Tracker - 21st March, 2022 
Market had almost six weeks since the last monetary policy meeting, when Mario Draghi pointed that European Central Bank (ECB) might extend its stimulus at December meeting. That's a lot of time to chew in expectations and push market in anticipations. Since ECB's last meeting market has pushed Euro down against Dollar more than 700 points.
So at one line, it wouldn't be unfair to say that expectations are high.
Next comes the question, Can ECB surprise market? - which brings us to the next question - does it want to surprise market?
Definitely yes. According to our view at FxWirePro, ECB is well aware that if it underwhelms market, all the good that is done so far, could get reversed substantially.
First knock will be Euro. Though Euro is not a policy tool, ECB is not likely to prefer stronger Euro, especially since it has been doing lots of goodies for the Euro zone.
However, the task is not going to be easy one, since market has big expectations from ECB.
Good part is, ECB is well aware of that.
Last time too, ECB has hinted at pushing stimulus at future meetings and was even finally able to surprise the market.
While, one might see this expectations build up as disadvantageous, ECB might even (our view is they are) use to decide on the size of the stimulus.
Tools of ECB -
ECB has lots of tools at its disposal. Deposit rates (-0.2% at present), duration of asset purchase program (as of now till September 2016) and pace of purchase (€ 60 billion/month is current pace).
Our (FxWirepro) view -
ECB likely to use combination of tools. ECB could cut deposit rates by 15 basis points or use a tiered system and introduce cut as large as 20 basis points.
Extension of the purchase program by six months at least (doing any less makes less sense).
Increase the pace of purchase by €15 billion. It might depend on the size of interest rate cut. Lower the rate cut (-10 basis points), higher would be the asset purchase increase (€20 billion).
Nevertheless, even if ECB equals market expectations, there could still be some correction in Euro, due to extreme one sided sentiment. However those would be short lived.
Euro is waiting the ECB at 1.056 against Dollar.
