The ECB is holding a meeting on monetary policy today, the results of which will be published at 14:45 (GMT 3), with a press conference to follow at 15:30 (GMT 3). This could bring about extremely high volatility on the single currency in the short term, and will also play a defining role in its mid-term trajectory.
At the previous meeting on the 14th of June, the decision was made to continue with the bond-buying program until the end of the year, wrapping it up in December. However, it was also decided to keep the purchase rate at 30bn EUR a month through the end of September, after which it’ll be reduced to 15bn EUR a month. As far as the key rate is concerned, the regulator hinted that there’s no case for a rate hike at least until mid-2019.
I reckon that today, the ECB will reiterate its previous stance on monetary policy. In other words, I don’t expect any surprises. However, I can see Mario Draghi commenting on the Eurozone’s current economic situation and acknowledging that the economy is starting to stabilise following slowed economic growth in the first half of 2018. In this regard, Draghi will emphasise that the plan to end the bond-buying program at the end of the year is not going to change.
In my opinion, if the ECB meeting pans out as I’ve described above, I reckon that the euro’s resurgence against the dollar that we’ve witnessed over the past few days will come to an end, and the dollar will start pressuring the euro again. It seems to me that any rhetoric from the ECB with regard to tightening monetary policy would damage the euro, given that the latest report from IHS Markit expects Eurozone economic growth to slow down and US economic growth to speed up.