Schäuble warning, Weidmann warning, Cœuré assurance: what’s cooking in ECB?

Since December, after European Central bank (ECB) reduced rates further into negative by 10 basis points to -0.3%, Euro zone economy has turned for the worse. Latest reading in fact shows, Economy has slumped to deflation again, which headline price contracting -0.2% from a year ago.

• German Bundesbank chief, Jens Weidmann few weeks back warned that ECB staff might have to reduce their inflation forecast by large. These comments are considerable for the fact that Bundesbank is the most hawkish one in the group. So the chances are high that ECB would act.

• Days back German finance Minister Wolfgang Schäuble voiced against further fiscal and monetary stimulus and voted in favor of reforms. Does this mean not much from ECB next week?

• Today European Central Bank board member said that the central bank is paying close attention to the risks stemming from negative rates, especially to banks as it erodes their profitability. Does it mean no further reduction in deposit rates?

After December disappointment it is difficult to gauge ECB's thinking, however we expect ECB is likely to fire QE canon this time around in tune of €20 billion or more.

But there do exists a possibility that they would disappoint.

One of our calculation matrix is do pointing to weaker Euro against Dollar, to as much as 1.015 area for EUR/USD.