ECB policy meeting preview: What to expect of EUR/USD?

By FXStreet FXStreet (Mumbai) – The EUR/USD pair is trading at its lowest in seven months, while the short duration German 2-year yield fell to a fresh record low ahead of the European central Bank rate decision, which will be followed by the Draghi’s press conference.

Deposit rate cut, additional QE priced-in?

The EUR/USD hit a fresh seven month low of 1.0552 and the German 2-year yield hit a fresh record low of -0.451%. The yield trades well below the current deposit rate (-0.20%). Assuming the deposit rate cut stands at -0.30% (10 bps cut expected), the 2-year yield is still 15 bps lower. So it appears the bond markets may have priced-in both – deposit rate cut and extension/expansion/front loading/diversification of the QE program.

ECB to keep economic forecasts unchanged – Bloomberg

A Bloomberg report released yesterday said the bank is likely to keep its economic forecasts largely unchanged; expect a minor downward revision of the inflation forecasts. This is the third time Bloomberg released an article carrying a hint of the possible ECB action a day before the decision. On the last two occasions – Sep 2012 (OMT decision) and Jan 2015 (QE program) – Bloomberg published articles hinting at the ECB’s …read more

Source:: FX Street