ECB meeting: what to expect?

Will EURUSD resume the rally?

The ECB meeting is the key position in today’s calendar with decision expected at 12:45pm (GMT) and conference about to begin 45 minutes later. This events has often significant impact on DE30 and EURUSD.

What to expect?

The ECB would never admit it, but it’s actually out of ammo in terms of any reasonable tools affecting the economy. A combination of negative rates (-0.5% deposit rate) and huge QE (about 80 billion euro per month) has done little other than boosting asset prices. The maximum size of the key PEPP  program was increased in December (to 1.85 trillion euro) and duration to March 2022 and thus ECB must hope to stay put for an extended period of time.

One factor that worries the ECB is the rate of the EURUSD. Higher EURUSD contains euro area growth and inflation but the ECB has refrained from interventions. If anything, ambiguous comments about the euro from Christine Lagarde (ECB president) caused EURUSD rallies during the past conferences – so traders should watch for these today.

What are the key levels to watch?

DE30 is fighting to close above 14000 today and if the ECB is too soft on the euro this could be a potential problem. Meanwhile, the EURUSD has returned to gains lately after rebounding from 1.2050 with the key support level untouched at 1.20. The next key resistance is recent high of 1.2350.

We will report the outcome of the ECB meeting in the News section.