What to expect from ECB ahead?

Today European Central Bank (ECB) is to provide further guidance in policy meet. The result to be announced at 11:45 GMT, followed by the press conference at 12:30 GMT. Meeting is being held in Frankfurt.

Current policy measures–

• Deposit facility rate at -0.40 percent
• Refinancing rate 0.00 percent
• Marginal lending facility rate at 0.25 percent
• ECB buying assets at €80 billion per annum, which to include corporate debt securities.
• In March, ECB has launched four new TLTROs.

Expectation today –

• European Central Bank (ECB) is expected to maintain its current policy.
• However, there are talks in the market that ECB would cut its growth forecast at today’s meeting as a result of the Brexit referendum and could indicate more asset purchases beyond the current timeline that ends in March next year.

What to watch out for –

• ECB’s take on the effects of the UK referendum and what plans it has to mitigate future risks. The market would be expecting concrete measures rather than just saying that all tools at ECB’s disposal.

• ECB’s take on the recent rise in Target2 balance for Italy.
   
• ECB is likely to face questions on the success of the QE as inflation remains a far-fetched dream.

• Weather ECB keeps the door open for further asset purchases stimulus or not?

• Does ECB leaves the door open for further interest rate cut?

• Could there be difficulties with shortages of eligible bunds.

Impact –

• Stimulus comments will be closely scrutinized and also the future outlook.
   
• ECB president Draghi will try to talk down the Euro as the stimulus expectations are likely to weigh on the single currency.

The euro is currently trading at 1.129 against the dollar.