ECB Preview: what to expect of EUR/USD

The European Central Bank will hold its monetary policy meeting today, with market expectations largely favouring a steady stance. In fact, market participants expect the central bank to keep its cautious approach and to remain vigilant on the potential moves by the BoE following the decision by the UK to leave the European Union in late June.

According to strategists at TD Securities, “There was speculation that the ECB would consider changing the composition of its QE purchases, presumably moving from a capital key weighting to weighting purchases by debt outstanding instead…  There has also been speculation that the ECB may be worried about the impact of Brexit and hint that there's further easing to come in September.  We only see a marginal hit to EZ growth (couple of tenths of a ppt) and if the BoE can wait to ease then surely the ECB has no reason to rush”.

Regarding FX, if consensus materializes, EUR could see its upside intensified, facing the interim target around the 200-day sma around 1.1080. If cleared, the next hurdle emerges at the 1.1160/80 band, where are located previous highs and then the 1.1225/30 region, home of the base of the 6-month rising channel.

Trade Live ECB rate decision & Mario Draghi speech - July 21 Coverage