ECB preview: What to expect of EUR/USD?

By FXStreet The common currency just refused to drop in the run up to European Central Bank (ECB) after news broke out that there no consensus among policymakers beyond a 10 basis points cut. Consequently, EUR/USD bounced off from the area around 1.0845 (61.8% of 1.0517-1.1376) to trade around 200-DMA level of 1.0945 earlier this week.

Rate cut priced-in

A 45-minute window between the rate decision and press conference could see EUR moving higher if bank comes out with a 10 bps cut in the deposit rate as expected and largely priced-in. However, gains could be capped once again around 200-DMA on account of caution ahead Draghi’s press conference. Moreover, for the EUR to drop during the 45-minute window, the ECB would have cut rates more than 10bps.

Will ECB under deliver or over deliver?

Stage is set for Draghi to push the dovish button hard as sharp fall in EUR at a time when oil is rising could help inflation rise faster than expected. Hence, if low inflation is a main issue, then odds of a big bazooka are high.

However, Bank of Japan’s negative rate surprise was not well received by the markets. Furthermore, a big expansion in the …read more

Source:: FX Street