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 12:45 GMT, followed by a press conference at 13:30 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 had launched four new TLTROs.
• Assets can be bought at yields below the deposit rate.
• In the last meeting, ECB tapered asset purchases to €30 billion and extended the program until September 2018. The current program was due to expire at the end of the year.

Expectation today –

• European Central Bank (ECB) is expected to maintain its current policy.
• With ECB taking action at the last meeting, there is no change expected.

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 2018?

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

Impact –

The euro has remained upbeat despite the European Central Bank (ECB) extending the asset purchase program beyond expectation. We expect the euro to move higher after ECB meeting.