ECB likely to keep policy rates on hold, euro to modestly depreciated against USD in months ahead

The European Central Bank is scheduled to meet this week and is unlikely to change its three main policy rates, noted Wells Fargo in a research report. Furthermore, the central bank is expected to continue to purchase EUR 60 billion worth of bonds each month for the next few months. But the expectations is that at some point in this summer, the ECB Governing Council might announce plans to “taper” its bond purchases further if the outlook of economy continues to be positive and if inflation continues to accelerate higher, added Wells Fargo.

Against the backdrop of the U.S. Fed, which is likely to hike its rates two more times in 2017, and the ECB, which is expected to stay on hold, the euro is expected to weaken modest against the U.S. dollar in the months ahead, said Wells Fargo.

Meanwhile, the retail sales data, which is set to be released on Tuesday, is likely to have risen in April, owing to festive spending, and accelerate from above consensus March’s 0.3 percent month-on-month, said DBS Bank in a research report. The jobless rate continues to drop, falling to 9.3 percent in April from March’s 9.4 percent.