FxWirePro: 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 a press conference at 12:30 GMT. The meeting is to be held in Frankfurt, Germany.

Current policy measures–

• Deposit facility rate at -0.40 percent
• Refinancing rate 0.00 percent
• Marginal lending facility rate at 0.25 percent
• ECB is buying €60 billion assets per month.
• ECB had launched four new TLTROs.
• Under the new rule, assets can be bought at yields below the deposit rate.

Expectation today –

• European Central Bank (ECB) is expected to maintain its current policy.
• Some are speculating that the central bank might signal further reduction of asset purchase pace.

What to watch out for –

• Change in inflation forecast.
   
• Take on tapering or on the future path of monetary policies.

• ECB’s take on Greece debt restructuring, which is still lingering.

• The high level of NPLs in European banks, especially in Italy.
   
• Does ECB leave the door open for further interest rate cut or the next move to be a hike? How soon might such come?

• Concerns with regard to European banks’ balance sheet and call for the creation of a pan European bad bank.

• Contingency plans from the Brexit fallouts.

• What are the major risks for Eurozone in 2017?

• Whether ECB seems comfortable with the level of the Euro or does Draghi talk the currency down.

Impact –

The euro has remained upbeat since the French election outcome in April. The performance improved after suggestions from officials at the ECB that next move is likely to be winding up of extraordinary stimulus. The weakness of the dollar is also proving support. The euro is currently trading at 1.196 against the dollar, upbeat ahead of ECB.